Shipkevich Bitcoin and ICO Attorney
Felix Shipkevich August 29, 2011

The SEC announced today that it has charged James Davis Risher and Daniel Joseph Sebastian with operating a Ponzi scheme through their private equity fund. The Florida firm allegedly took more than $22 million from over a 100 investors, including many teachers are retirees.

According to the SEC, Risher handled the trading operations, while Sebastian was in charge of distributing materials and soliciting investors. Beginning in January 2007, Risher and Sebastian told potential investors that the fund earned 14%-124% annually.  They represented themselves as “two unique individuals” using their expertise to “create an investment vehicle that would allow investors to capitalize from both bull and bear markets.”

Sebastian often solicited clients from his previous position as an insurance broker. He would solicit educators, retirees, and church-members. He convinced them to roll over insurance an annuity investments into his fund, promising a higher rate of return that products he sold previously. This led at least one investors to liquidate an annuity she purchased previously and invest in his fund. Investors were told that they could never lose their principal, and Sebastian even provided some with written guarantees to that effect. Risher claimed that he had significant equity trading experience, while in reality he spend 11 out of the past 21 years in jail.

In this manner, the defendants were able to raise a total of $22 million. Once investors had sent funds into the account, the defendants sent them account statements showing the high returns promised in their promotional materials. However, the SEC complaint alleges that very little money was actually placed into a fund, no more that $2.5 million. Most was misappropriated for personal uses, such as jewelery, gifts, and property. Even more was paid to the defendants in overblown management and performance fees.

According to the director of the SEC’s Miami Regional Office, “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 Sebastian used investors’ life savings and retirement nest eggs to line their own pockets.” Periodically, the defendants would distribute the funds as Ponzi payments to investors in order to prolong the ruse.

Read more about this SEC enforcement action.
Creative Commons License photo credit: kevindooley