Investment adviser Martel to pay over USD7.2m for fictitious investment products
The Securities and Exchange Commission has obtained a final judgment by default against investment adviser Gary J Martel, a resident of Chelsea, Massachusetts, in a case originally filed by the SEC in June 2012.
The SEC charged Martel, who conducted business under the names Martel Financial Group and MFG Funding, with selling fictitious investment products and using the funds raised for purposes other than making the investments he promised.
The Court froze Martel's assets at the time the Commission filed the case. Among other things, the final judgment recently entered by the Court ordered Martel to pay over USD7.2 m disgorgement of ill-gotten gains, prejudgment interest, and civil penalties.
According to the Commission's complaint, over the course of several years, Martel raised money from investors in Massachusetts, Vermont, New Hampshire, New York and Florida by promising to invest their money in certain "pass through" bonds with favourable interest rates, as well as by promising to make pooled investments in mortgage-related securities or, more recently, Facebook's initial public offering. The Commission's complaint alleged that Martel's bonds and investment pools were fictitious, and instead of investing his clients' funds on their behalf as he promised, Martel used the funds for other purposes, including to make payments to earlier investors. The complaint charged Martel with violating the anti-fraud provisions of the federal securities laws.
The final judgment ordered Martel to pay disgorgement in the amount of USD3,261,438, representing profits gained as a result of the conduct alleged in the complaint, plus pre-judgment interest on the disgorgement in the amount of USD695,806, and a civil penalty in the amount of USD3,261,438.
On 12 December 2012, Martel pled guilty to criminal charges brought by the US Attorney for the District of Massachusetts, based on the same conduct. On 4 January 2013, the Commission instituted related administrative proceedings against Martel to determine what, if any, remedial action is appropriate and in the public interest. Among the relief that could be imposed in the administrative proceedings is a bar prohibiting Martel from involvement in certain parts of the securities industry.
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