United States: SEC Brings Charges Against Additional Defendant In Fraudulent Scheme Involving Certificates Of Deposit

On January 5, 2022, the SEC charged a former FINRA-registered investment professional with allegedly perpetrating an internet-based fraud by luring investors to websites offering fake certificates of deposit ("CDs").¹ According to the SEC's complaint, this long-running scheme resulted in at least 100 victims losing at least $40 million collectively, with many of these victims being older adults investing retirement savings.

According to the SEC's complaint before the US District Court for the District of New Jersey, the former broker-dealer, and other participants in the scheme, created websites that mimicked those of existing financial institutions and purchased internet advertisements that would direct victims to these spoofed websites offering fictitious CDs. The websites directed investors to call a telephone number for more information. When investors called the listed phone numbers, the former broker-dealer would impersonate registered representatives at the legitimate firms and instruct victims to wire funds to certain domestic or foreign bank accounts, supposedly to purchase the CDs. These funds were then allegedly misappropriated by the various perpetrators of the scheme, with the investors never receiving the promised CDs.

In its complaint, the SEC charged the former broker-dealer defendant with violating Section 17(a) of the Securities Act of 1933 (the "Securities Act"), as well as Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereof. The SEC sought to enjoin the defendant from engaging in future violations of the federal securities laws, as well as an order that the defendant disgorge his profits from the scheme and pay a civil monetary penalty.

Footnote

1 SEC Press Release 2022-1, "SEC Charges Additional Defendant in Phony Certificates of Deposit Scam" (January 5, 2022), available at https://www.sec.gov/news/press-release/2022-1. See also Complaint, U.S. Securities and Exchange Commission v. Allen C. Giltman, (D.N.J. 2022) (No. 2:22-cv-51), available at https://www.sec.gov/litigation/complaints/2022/comp-pr2022-1.pdf.

Originally published in REVERSEinquiries: Volume 05, Issue 01.
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