SEC Charges Participants in $5m Boiler Room Scheme
The US Securities and Exchange Commission has charged three individuals and seven entities for their role in a boiler room scheme that defrauded approximately 150 investors.
The SEC filed complaints against Edward M. Laborio and others for using high-pressure sales tactics to raise up to $5.7 million from approximately 150 investors through the fraudulent sale of five unregistered securities offerings involving a group of related entities.
The complaint filed in Massachusetts stated that Laborio and Fraiman falsified several statements to investors about the Envit Companies’ businesses, revenues, financial projections, uses of investor funds, and historical returns generated by Envit Fund, a purported hedge fund that in reality never conducted any operations.
According to the complaint, Laborio also created scripts with sales pitches containing fabricated information. For example, one of Laborio’s scripts allegedly included unfounded claims that investors would receive quarterly dividends and “2-3x return on money.”
Laborio also allegedly used investor proceeds to cover gambling losses, to make direct payments to himself, and to cover personal expenses. Fraiman allegedly represented to an investor that Envit Fund, the purported hedge fund, returned 42.9% in 2006 and 43.7% in 2007, even though the hedge fund was not launched until mid-2007 and never conducted any operations.
The complaint further alleges that Lazar raised $585,000 from approximately 10 investors through the sale of a PIPE (private investment in public equity) in Envit Group (one of the five unregistered securities offerings) by misrepresenting that the PIPE guaranteed an annual 8.5% dividend, and that it was safe, like a fixed annuity or a CD.
The scheme ran from approximately December 2006 to August 2009.
Laborio, formerly of Boston, Massachusetts, is now a resident of Boca Raton, Florida. The SEC also charged Jonathan Fraiman of Lantana, Florida; Matthew K. Lazar of Westerville, Ohio; and seven entities controlled by Laborio: Envit Capital Group, Inc.; Envit Capital, LLC; Envit Capital Holdings, Inc.; Envit Capital Private Wealth Management, LLC; Envit Capital Multi Strategy Mixed Investment Fund I LP; Aetius Group PLC; and Aetius Group LLC.
The SEC seeks in its action permanent injunctions, disgorgement plus prejudgment interest, civil penalties, penny stock bars against Laborio, Fraiman, and Lazar, and an officer and director bar against Laborio.
The SEC previously suspended trading in the securities of Envit Group in May 2009 and subsequently revoked the registration of the securities of Envit Group in September 2009.