Another Investment Fund Fraud Case

The SEC continues to focus on investment fund fraud cases, filing its second action this week that contains Ponzi scheme allegations. SEC v. Beckman, Case No. 11 CV 574 (D. Minn. March 7, 2011). The SEC's most recent investment fund fraud action is against Jason Beckman and his controlled entity, registered investment adviser Oxford Private Client Group, LLC. Mr. Beckman's wife is named as a relief defendant.

The case is based on allegations which are typical of the string of investment fund fraud cases the Commission has brought in recent months. The fund is alleged to have had over 1,000 investors who paid in about $194 million. Mr. Beckman's contribution to the over all scheme was to raise about $47.3 million from 143 investors over a three year period beginning in August 2006, according to the complaint.

Investors were offered the opportunity to acquire an interest in the Currency Program by Mr. Beckman and his assistants. They were told that their funds would be placed in a segregated account. Trades would then be made in foreign currencies using an arbitrage strategy. Nevertheless, the investment was low to no risk because there would be both long and short positions. The invested funds could be withdrawn at any time. Key of course was the guarantee. Investors were told that there would be a guaranteed return of 10.5% to 12% per year.

As part of the scheme a number of investors were permitted to withdraw their fund. Those investors also received the promised profits. Approximately $8.2 million was paid out to investors.

Unfortunately, the withdrawals were paid from other investor funds, according to the Commission's complaint. In fact there were no segregated accounts. The claimed guaranteed returns were a fraud. The returns paid to investors were not profits but the money of other investors. The profits withdrawing investors were told they received were actually nothing more that the product of a mathematical calculation made under the direction of Mr. Beckman. About $7 million of the investor funds went to Mr. Beckman and his wife to sustain a life style suitable for the rich and famous. While some of the investor funds were sent on to trading entities, there were huge losses rather than profits.

Mr. Beckman's operation is allegation to have been part of a bigger fraudulent scheme. That operation was conducted by Trevor Cook and his associates. Mr. Cook is currently serving a 25 year sentence in federal prison following his guilty plea on wire fraud and tax evasion charges. The Commission filed an action against Mr. Cook in 2009.

The SEC's complaint against Mr. Beckwith and his company alleges violations of Securities Act Sections 5 and 17(a), Exchange Act Section 10(b) and Advisers Act Sections 206(1) and (2). A freeze order has been issued by the court as well as an order appointing a receiver. The case is in litigation.

For more cutting edge commentary on developing securities issues, visit SEC Actions, a blog by Thomas Gorman.

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