SEC Charges Arizona Resident with Securities Fraud

May 10, 2012 /

The Securities and Exchange Commission has filed a civil injunctive action in Atlanta, Georgia alleging that Gerald D. Kegley and the company he operates, Prism Financial Services, LLC, participated in a fraudulent “Prime Bank” scheme that violated the antifraud and securities and broker dealer registration provisions of the federal securities laws.

According to the SEC, from at April 2010 through August 2010, the defendants were directly responsible for introducing six individuals, who invested $1.95 million, to the fraudulent scheme. The SEC’s complaint alleges that the defendants forwarded misrepresentations made by others to investors. These misrepresentations included: 1) that investors could draw upon bank issued guarantees worth millions of dollars without having to repay the withdrawn funds; and 2) that investor funds would be held in escrow until the bank guarantees were issued. The complaint alleges that defendants knew or were reckless in not knowing that both of these representations were false because no such bank guarantees existed and investor funds were misappropriated immediately upon receipt.

The defendants also misrepresented that they would be paid commissions only once the investor received the bank guarantee, the SEC said. In fact, the defendants were paid commissions relatively soon after the investors transferred the money.

Furthermore, they allegedly told investors that they had previously worked on a successful bank guarantee program. The defendants, however, had actually reported this purportedly successful bank guarantee program to the Federal Bureau of Investigation because they believed it was a fraud.

 

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