The Securities and Exchange Commission has charged a Corinth, Texas man with securities fraud for soliciting more than USD3.45 million from several thousand deaf investors in an investment scheme that the SEC halted last year.
The SEC previously charged Imperia Invest IBC with securities fraud and obtained an emergency court order to freeze the investment company’s assets.
In a complaint filed late yesterday, the SEC alleges that Dunn, who is deaf, solicited investments for Imperia over a three-year period from others in the deaf community, promising them he would invest in Imperia on their behalf. What Dunn did not tell investors is that he was misappropriating a portion of their funds to pay his mortgage, car payments, car insurance, and a variety of other personal expenses. Dunn sent the remaining amounts to Imperia’s offshore bank accounts. While Imperia guaranteed returns of 1.2 per cent per day on these investments, investors have never been paid any interest after giving their money to Dunn to invest. Even after the SEC charged Imperia and issued an investor alert about the scheme, Dunn continued to reassure investors that Imperia was legitimate and they would be paid.
“Dunn was aware that Imperia lost investor money and was not accurately crediting investor accounts, yet he continued to send investor money to Imperia without disclosing to investors what was happening,” said Kenneth D. Israel, Director of the SEC’s Salt Lake Regional Office. “To further take advantage of others in the deaf community, Dunn was siphoning off about 10 per cent of the money he collected from investors to pay his own bills before sending the rest of money into the Imperia quagmire.”
According to the SEC’s complaint filed in federal court in Plano, Texas, Imperia purported to invest in Traded Endowment Policies (TEP), which is the British term for viatical settlements that involve the sale of an insurance policy by the policy owner before the policy matures. The TEP investments offered by Imperia were investment contracts in which investors were required to invest at least USD50, which purportedly allowed the customer to obtain an USD80,000 loan from an unnamed foreign bank that would be used to purchase a TEP. Imperia then claimed to trade the TEPs and pay a guaranteed return to the investor of 1.2 per cent per day.
The SEC alleges that Dunn misrepresented to investors that he would help them invest with Imperia to purchase TEPs. No investor funds were used to purchase TEPs. Dunn also represented to investors that he had met and knew the individuals behind Imperia. However, Dunn had never actually met anyone affiliated with Imperia.
According to the SEC’s complaint, Imperia also required that investors purchase a Visa debit card to access their investment proceeds. Imperia charged customers a fee to purchase the Visa debit card ranging from USD145 to USD450. Visa had not authorized Imperia to use its name or trademarks and sent Imperia a cease-and-desist letter instructing it to halt unauthorized use of the Visa name and logo. Nonetheless, Dunn solicited and collected investor money for these purported Visa debit card purchases.
According to the SEC’s complaint, Dunn’s investors transferred funds to him via money orders that he then cashed and deposited into accounts he controlled. From there, he forwarded funds to Imperia. Dunn initially sent money to Paypal-like accounts in Costa Rica, Panama and the British Virgin Islands, but later wired it directly to bank accounts with no apparent link to Imperia in such various other countries as Cyprus and New Zealand.
The SEC alleges that Dunn did not attempt to verify whether Imperia was actually investing the money as promised. He also failed to verify whether Imperia was licensed to sell securities in any state, whether any registration statements relating to the offers or sales of Imperia securities were filed with the SEC, or whether Imperia was registered with the SEC in any capacity.
The SEC alleges that Dunn violated Sections 5(a), 5(c) and 17(a) of the Securities Act and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder.