Ponzi Scheme in Pennsylvania Busted

Jack Humphrey, Regulatory journalist
July 31, 2012 /

The US Securities and Exchange Commission filed fraud charges against Bucks-County, Pennsylvania-resident Emanuel L. Sarris, Sr. and his firm, Sarris Financial Group, Inc. for facilitating a massive Ponzi scheme operated by another individual.

The SEC’s complaint alleges that, from 2001 through 2009, Sarris (through Sarris Financial) convinced over 70 individuals to invest over $30 million in private funds that purportedly traded in foreign currencies, called the “Kenzie Funds.”

The Kenzie Funds, however, actually were a massive Ponzi scheme that defrauded at least 400 investors out of more than $105 million, the SEC said.

The U.S. District Court for the Northern District of Illinois already ruled against the perpetrator of the Kenzie fraud, ordering them to pay $44 million in disgorgement and prejudgment interest and a $150,000 civil penalty.

According to the SEC’s complaint, Sarris and Sarris Financial, when selling the Kenzie Funds, falsely represented their relationship with the Kenzie Funds; falsely claimed to have seen the Kenzie Funds’ foreign currency trading and banking; made unverified claims about the Kenzie Funds’ safety, performance, and legitimacy; and, in classic Ponzi scheme fashion, twice proposed that the Kenzie entities use existing or new investor money to pay redemptions to departing investors.

In fact, investors didn’t know Sarris was employed by one of the companies that managed the Kenzie Funds to solicit investment in the Kenzie Funds, and Sarris Financial received incentive fees for inducing investments in the Kenzie Funds.

The SEC claimed Sarris and Sarris Financial never saw any of Kenzie’s trading or banking; they actually did little to investigate the Kenzie Funds, instead ignoring and concealing numerous red flags that raised significant questions about the entities; and Sarris and Sarris Financial never disclosed their proposals to make Ponzi-like payments to their clients.

 

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