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SEC halts USD68m Ponzi scheme involving Caribbean-based bank and Swiss affiliate

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The US Securities and Exchange Commission has obtained an emergency court order halting a USD68m Ponzi scheme involving the sale of fictitious high-yield certificates of deposit by Cari

The US Securities and Exchange Commission has obtained an emergency court order halting a USD68m Ponzi scheme involving the sale of fictitious high-yield certificates of deposit by Caribbean-based Millennium Bank.

The SEC alleges that the scheme targeted US investors and misled them into believing they were putting their money in supposedly safe and secure CDs that purportedly offered returns that were up to 321 percent higher than legitimate bank-issued CDs.

The SEC’s complaint alleges that William J. Wise of Raleigh, North Carolina, and Kristi M. Hoegel of Napa, California, orchestrated the scheme through Millennium Bank, its Switzerland-based parent United Trust of Switzerland, and US-based affiliates UT of S and Millennium Financial Group.

In addition to Wise and Kristi Hoegel and these entities, the SEC has charged Jacqueline S. Hoegel (who is the mother of Kristi Hoegel), Brijesh Chopra, and Philippe Angeloni for their roles in the scheme.

"As alleged in our complaint, the defendants disguised their Ponzi scheme as a legitimate offshore investment and made promises about exuberant returns that were just too good to be true," says Rose Romero, director of the SEC’s Fort Worth regional office. "This case demonstrates that investors need to be especially cautious when placing money with entities that may be outside the reach of US regulators."

According to the SEC’s complaint, at least USD68m was raised from more than 375 investors since July 2004.

Millennium Bank, a licensed St. Vincent and the Grenadines bank, solicited new investors for its CD program through blatant misrepresentations and glaring omissions in its online solicitations and in advertising campaigns targeting high net-worth individuals.

For example, in offering materials, Millennium Bank claimed that its parent, United Trust of Switzerland, provides Millennium Bank with "over 75 years of banking experience, correspondent banking relationships, decades of knowledge in privacy and confidentiality as well as extensive training for our customer services professionals." In fact, the SEC alleges, United Trust of Switzerland is not a Swiss-licensed bank or securities dealer.

Potential investors visiting Millennium Bank’s Web site also were falsely informed that Millennium Bank is not affected by the global financial crisis and has a 100 per cent client satisfaction record going back close to ten years, and has its own affiliate asset management company with highly seasoned professionals who invest meticulously.

The SEC alleges that investor funds were not used for legitimate banking or investment activities. Instead, to create the appearance of a legitimate offshore investment, investors purchasing the CDs were instructed to deliver their investment checks to the offshore bank.

The SEC alleges that the checks were then packaged and delivered to UT of S’s office in Napa, California, where the checks were electronically deposited by a remote deposit machine into a UT of S account. The account, which is held at a US financial institution, also received millions of dollars of investor funds via wire transfer. From that account, the SEC alleges, the defendants misappropriated a vast majority of the investor funds to enrich themselves and pay personal expenses, while making relatively small Ponzi payments to investors.

Judge Reed O’Connor, in the US District Court for the Northern District of Texas, granted the SEC’s request for an asset freeze and emergency relief for investors.

The SEC charges that the defendants violated the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s complaint also alleges that the defendants violated the registration provisions of the Securities Act. The complaint seeks permanent injunctions, disgorgement together with prejudgment interest, and financial penalties.

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