The SEC has filed charges against an Indiana investment advisor for allegedly running a multi-million dollar Ponzi scheme.
The commission is charging Indianapolis-based wealth management and business consulting firm Veros Partners, its president and two associates with fraudulently raising at least $15 million from investors, most of whom were clients of the advisory practice.
The case involves two rounds of sales of securities in farm loan ventures -- Veros Farm Loan Holding in 2013, and FarmGrowCap the following year. Both of those entities are also named as defendants.
Those groups are controlled and operated by Veros Partners President Matthew Haab and associates Jeffery Risinger, an attorney, and Tobin Senefeld, the head of Pin Financial, the broker that Veros used. Each of those individuals and the firms are named as defendants in the SEC's complaint.
Haab did not respond to phone and email messages seeking comment. Risinger declined to comment. Senefeld's voicemail is full and not accepting messages. A message left at the general voicemail at Pin Financial was not immediately returned.
The commission alleges that the defendants told clients that their investments would be designated for short-term loans made to farmers for the 2013 and 2014 growing seasons. The commission acknowledges that a portion of that money was in fact used for its intended purpose, but much of the funds were used to cover back debts that the farms owed. Additionally, the defendants are alleged to have used $7 million of the funds to make payments to investors in separate offerings, and to have paid themselves more than $800,000 in undisclosed "success" and "interest rate spread" fees.
"They also repeatedly misled investors about the risks, nature, and performance of the investments and underlying farm loans," the commission says in its complaint.
The SEC is charging that Haab and Risinger made the 2013 and 2014 securities offerings without informing investors that the previous years' loans had not been fully repaid. Haab is alleged to have misrepresented that the investors in the 2013 offering and the attendant loans had both been fully repaid.
INVESTORS OWED $9 MILLION
Of the 2014 offering, the SEC claims that less than $5 million of the roughly $12 million in loans has been repaid. Moreover, the $7 million still owed on those loans is not enough to repay investors, who are owed about $9 million in principal and interest, due to be paid on April 30.
The SEC says that the defendants have indicated "that their only recourse to repay the investors is by fees they expect to receive from other existing or planned offerings, including at least two 2015 farm loan offerings to Veros clients through which they are seeking to raise almost $25 million."
The commission is seeking a permanent injunction against the defendants and financial penalties, which it is trying to obtain through Pin Financial, the New York brokerage that Senefeld runs.
U.S. District Court Judge Jane Magnus-Stinson in Indiana granted an asset freeze and a temporary restraining order barring the defendants from engaging with any actual or perspective investors, and prohibiting Veros from working with any investors in private securities offerings.
An in-person status conference and preliminary injunction hearing are scheduled for May 1.
PREVIOUS SEC ACTION
Previously, Senefeld was the subject of an SEC disciplinary action when he accepted a 12-month ban from the industry in 1999 for his role in a "free-riding" scheme, buying and selling stock through nominee accounts with insufficient funds.
Senefeld, who denied "all allegations of wrongdoing" in that case, has also been the subject of several liens related to taxes owed over the years, according to BrokerCheck.
Kenneth Corbin is a Financial Planning contributing writer in Boston and Washington.
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