The Securities and Exchange Commission (SEC) on Dec. 12 charged a New York attorney with conducting a Ponzi scheme that defrauded legal clients, close family members and friends.
The SEC alleges that Charles A. Bennett, whose practice is based in Manhattan, raised $5 million by selling purported investments in what he described as a pool of funds that invested in joint ventures with a Wyoming-based investment fund to which he claimed to have a close connection.
Bennett told investors their money largely would be used to fund investments in European real estate mortgage-backed securities, yielding lucrative rates of return ranging anywhere from 6 percent to 25 percent over short periods of time. He stated that prominent individuals, including a former governor of New York, were participating in these investment ventures.
The SEC alleges that the story was a sham, despite the fact that the fund exists. It said Bennett is an acquaintance of the fund’s principal, he had no connection to the fund, nor did he invest in any joint ventures associated with the fund or prominent individuals. In fact, he is alleged to have made no investments at all, instead secretly misappropriating all of the money he raised from investors
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against Bennett.
“Bennett falsely portrayed that he was closely associated with a Wyoming-based fund and would provide substantial rates of return to investors, but he was simply keeping the cash for himself and using it to perpetuate his Ponzi scheme,” said Andrew M. Calamari, director of the SEC’s New York Regional Office.
The SEC’s complaint charges Bennett with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934, and with selling securities for which no registration statement is active or on file with the SEC. The SEC’s investigation, which is continuing, is being conducted by Jorge G. Tenreiro and Lara S. Mehraban of the New York Regional Office. The case is being supervised by Amelia A. Cottrell, and Richard G. Primoff and Tenreiro are leading the SEC’s litigation. The SEC said it appreciated the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation in the case.
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