Investment fraud rising across state 

Idaho seems to be a gem for investment fraud, as another investment scheme has been halted in the Gem State by the Idaho Department of Finance.

Finance Director Gavin Gee said the department is seeing an increase in the number of investment fraud cases and in the dollar amounts involved.
“A down economy almost always will result in the surfacing of financial fraud, and particularly investment fraud,” he said. Economic downturns also can deflate traditional investments and prompt more people to seek alternatives.
In the last three months, the Department of Finance has filed four separate lawsuits trying to halt what it believes to be fraudulent transactions, those suits total more than $2 billion dollars.
The largest and most prominent investment schemes recently seen in Idaho and the U.S. have been Ponzi schemes – problematic for a number of reasons, including that they can run out of new investors quickly when the economy is down, Gee said. The classic Ponzi scheme generates no real profits despite promises – money from later investors is used to pay some returns to earlier investors, he said.
Investors who haven’t seen a return on their money will ask questions, and “sooner or later, if those questions aren’t answered, they will call us,” he said.
Guarantees represent a “huge red flag,” Gee said. “Many frauds will have some kind of guarantee or promise that the investment is essentially risk-free or very limited-risk.”  Many guarantees don’t comply with securities laws, and those that do qualify are supported with thorough documentation and explanation, he said.
Most frauds, especially those seen recently, don’t comply with securities laws as to proper registration of securities, proper licensing of people selling them, and proper written disclosures to investors, he said. Misuse of funds is another common problem in recent cases.
Parties accused of fraud often claim that their investment is not a security, Gee said. But the securities laws apply to most investments, and almost all where the investors are relying on the efforts of someone else to make them money.
On March 25, a complaint in Ada County District Court named four companies and three individuals who sold investments to more than 40 Idaho residents worth about $5 million.
Named in the suit are Jamison Potter, Adam Bentley, Christopher Driscoll, North American Capital Trust LLC; North American Capital Group, LLC; Pacific Partners, LLC; and Silverstone Equity Group, LLC.
Defendants allegedly raised more than $5 million and offered monthly rates of return of 10 percent, with the proceeds being forwarded to other out-of-state enterprises. The defendants operated or were otherwise located in Nampa and Eagle.
The state’s is seeking to halt what is believed to be violations of the registration and anti-fraud provisions of the Idaho Securities Act. The lawsuit alleges the defendants misrepresented to investors that the investment proceeds would be used to purchase insurance or life settlement policies. The scheme purportedly allowed investors the opportunity to review the insurance policies for acceptable terms prior to purchase. After investor approval, the insurance company would provide investors with a beneficiary registration form and finally the investors would receive legal right of ownership evidenced by a financial guarantee or death benefit.
The complaint alleges that the defendants never purchased life insurance policies and instead forwarded the investment funds to out-of-state promoters, who in turn sent the money to Panama. The Idaho Department of Finance seeks a court order permanently enjoining the defendants from further violations of the Idaho Securities Act, and seeks to place restrictions on future business activities.
Idaho has brought a number of anti-fraud cases recently.
On March 4, a civil lawsuit was filed against seven individuals and three companies who sold investments in two resorts located in the Dominican Republic, to more than 40 Idahoans costing them about $3 million.
On March 18, a bankruptcy judge ordered an examiner for the state of Idaho be allowed to probe the more than $2 billion in securities transactions dealt by DBSI. Those transactions in 11 states involved as many as 140 investors.
 In February, the U.S. Securities and Exchange Commission sued Daren Palmer and his company, Trigon Group, for allegedly defrauding at least 55 investors out of $40 million.
In 2008, the state was able to collect from Gabriel Joseph and his company, Annuit Coeptis, through a court order the return of more than $2.4 million received through unlawful and fraudulent transactions.

NEW! Online only subscription. 24/7 access to premium online subscriber content for only $79.00 a year!
CLICK HERE TO SIGN UP TODAY!

Comments are closed.