Cross Border Prime Bank Ponzi
The SEC has added two new defendants in the International Fiduciary Corp., Prime Bank Ponzi scheme. According to the amended agreement, the
"defendant IFC, at the direction of defendants Pinkett, Byer, and Stevenson, paid these relief defendants, collectively, at least $1.9 million. The complaint does not allege that these relief defendants engaged in any violations of the federal securities laws, but rather that they hold or control funds that represent fruits of violations committed by the other defendants."
Prime Bank scams are unusual in that they are a simple fiction - the documents which evince a trading program are simply made up.
According to the initial complaint,
"Defendants offered and sold minimum $100,000 investment contracts .to share in returns from an "asset growth program" that promised to trade in first tier medium-term bank notes." Investors were told that their money would be deposited into one of three banks, either United Bank, in Arlington, Virginia, Banco Bilbao Vizcaya Argentaria ("BBVA") or Great Florida Bank ("GFB"), both located in Miami, Florida. The defendants told investors that their money would remain in a segregated account, controlled by the investor, and that said account would "remain in full equity value or greater than full equity value." Investors were promised a rate of return that varied between 4% and 6% per month."
There is no such thing as a "1st tier medium-term bank note", here is the google search for the terms.
But there are 1st tier lenders, and medium-term bank notes. There are segregated accounts. But not much else is true.
According to the SEC's complaint:
"From at least July 2003, the defendants have been marketing investments in an "asset-growth program" in which individuals or entities invest funds with the defendants in order to participate in returns from a prime bank trading program. Investors were falsely told their money would be pooled and used as collateral to finance the purchase of "1" tier medium-term bank notes."
Investors have been falsely told, orally and through written offering documents that their investments with the defendants would remain owned by the investors in segregated accounts under their control. Investors were also led to believe that their investments in defendant IFC would be used only as collateral for trades and therefore would remain in insured bank accounts."
Collateral for trades and therefore remain in "insured bank accounts"?
Like all Ponzi schemes this one maintains and gains traction because our initial skepticism about make 4% a month rapidly gives way on the receipt of several months of paper statements "showing" a 4% monthly return. A fact which Charles Ponzi understood very well.
