The Securities & Exchange Commission has filed a civil suit, in US District Court in Miami, against Fort Lauderdale businessmen George Levin and Frank Preve, for the sale of unregistered securities, in connection with the massive $1.2bn Scott Rothstein Ponzi scheme. Levin was the managing member of a hedge fund that was involved in making investments in Rothstein's purported legal settlements; Preve managed the day-to-day operations of the investments.
The SEC complaint states that Levin's hedge fund sent an estimated $157m, collected from 173 investors, to Rothstein, Though a bankruptcy filing of the hedge fund alleges $775m. The legal settlements, allegedly of sexual harassment and employment discrimination claims, were completely bogus and fictitious. The defendants reportedly sold promissory notes backed by these non-existent cases.
The principal SEC charges include these allegations:
(1) That the defendants misrepresented to investors that they had procedures to in place to protect the funds.
(2) That the defendants represented that, prior to any settlement purchases, they would obtain documentation to insure the safety of the investment. In truth and in fact, the investments were often purchased without any documentation whatsoever.
(3) That, even as the Rothstein Ponzi scheme was falling apart, the defendants still sought to bring in new investors. They knew it was a Ponzi scheme, and that it had ceased to make interest payments, but they continued to bring in new investors.
The relief requested by the SEC:
(A) The disgorgement of all the illicit profits earned by the defendants.
(B) Financial penalties.
(C) Permanent injunctive relief against the defendants.
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* Case No: 12-cv-21917-UU (SD FLA).
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