SEC Halts Prime Bank Scheme

Jack Humphrey, Regulatory journalist
December 12, 2011 /

The Securities and Exchange Commission has filed charges and obtained an emergency court order to halt a prime bank scheme in which the perpetrators stole investor funds to purchase luxury cars, take a trip to the Bahamas, and pay the bills of a Washington D.C. law firm.

The SEC alleges that Pennsylvania resident Frank L. Pavlico III and Washington D.C. attorney Brynee K. Baylor offered investors risk-free returns of up to 20 times the original investment within as few as 45 days through the purported “lease” and “trading” of foreign bank instruments in highly complex transactions involving unidentified parties and secretive “trading platforms.”

However, the bank instruments and trading programs were entirely fictitious. Pavlico and Baylor provided investors with phony contracts and legal documents, digitally-created computer screen shots, and copies of fictitious foreign bank instruments as purported proof of the ongoing success of the transactions. Baylor and her law firm Baylor & Jackson P.L.L.C. acted as “counsel” for Pavlico’s company The Milan Group, vouching for Pavlico and acting as an escrow agent that in reality was merely receiving and diverting the majority of investor funds.

Prime bank schemes typically lure investors into believing they are being given an exclusive chance to participate in an international investing program involving complex financial instruments that generate high profits. Promoters often stress secrecy as a key to the success of the investments, and explain away the lack of specificity by stating that the financial instruments are too technical and complicated for non-experts to understand.

According to the SEC’s complaint filed on November 30 in federal court in Washington D.C. and unsealed by the court late yesterday, Pavlico and Baylor defrauded at least 13 investors out of more than $2 million since August 2010.

They allegedly used vague and complex terms in their communications to confuse investors, and claimed that confidentiality concerns prevented them from providing more fulsome details regarding the status of the investment. Pavlico and Baylor also provided investors with bogus excuses attempting to explain the delay in providing the promised returns, such as feigned i

 

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