SEC Charges Floridians with Running a Ponzi Scheme

The U.S. Securities and Exchange Commission (SEC) has notified in SEC Press Release 2011-171 that it has filed charges against a couple of Florida men for running a Ponzi scheme that generated some $22 million from over a hundred or so investors. The SEC has indicated in its release that Florida teachers, retirees and church members were among those scammed.

According to court documents, James Davis Risher out of Sanibel was in charge of the private equity fund’s trading operations. Daniel Joseph Sebastian out of Lakeland was responsible for disbursing the marketing materials and soliciting investors. The case is filed in the U.S. District Court for the Middle District of Florida. The alleged private equity fund was pitched as the Safe Harbor Private Equity Fund, the Managed Capital Fund and the Preservation of principal Fund, by Risher and Sebastian. Because of their unique experience, the duo promoted the investment as one that would allow investors to do well in bull and bear markets, alike.

Risher, who had spent 11 of the last 21 years in prison for various crimes, touted that he had considerable wealth and asset management experience, according to the SEC filings. In addition to lying about his background and experience, the two promised fake returns ranging from 14% to 124% by investing in the private equity deals and provided investors with fake statements indicating the monumental returns were being earned. Unfortunately, as in nearly every Ponzi scheme, the majority of the money raised from investors was used to support a luxurious lifestyle by taking out massive amounts of money for falsified management and performance fees, jewelry, gifts and real estate in Florida and North Carolina.

According to the SEC allegations, Sebastian got a lot of his customers from contacts he had as an insurance broker. His prime target was teachers, retirees, church congregations and others from Florida, Canada and California. The SEC claims that material misrepresentations were made by the duo about Risher’s criminal record, the investment strategy of the fund, its purported returns, the risk to the investors’ principal and the existence of audited financial statements. Finally, Sebastian promised investors they could never lose money by investing in their private equity fund. They even went so far as to provide investors with written guarantees of compensation from one of Sebastian’s companies, knowing that the company was penniless and the guarantee worthless.

The Director of the SEC’s Miami Regional Office, Eric Bustillo, summed it up by saying “Risher, who masqueraded as a highly successful equity trader, teamed up with Sebastian to tout sophisticated trading strategies they claimed would generate substantial profits for investors. Instead, Risher and Sebastain used investors’ life savings and retirement nest eggs to line their own pockets.” In its lawsuit, the SEC is seeking permanent injunctions, disgorgement, and fines against Risher and Sebastian.

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