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 The invested funds could be withdrawn at any time.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
For more cutting edge commentary on
developing securities issues, visit SEC Actions, a
blog by Thomas Gorman.
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