The U.S. Securities and Exchange Commission sued two Florida men over claims they fraudulently raised more than $157 million to fuel a Ponzi scheme that collapsed in October 2009.
George Levin and Frank Preve used money from 173 investors to purchase phony legal settlements from Florida attorney Scott Rothstein, who is serving a 50-year prison sentence for running the fraud, the SEC said today in a statement. Levin and Preve misrepresented to investors that they had procedures in place to protect the funds, the SEC said. The two men denied wrongdoing.
At least eight people have pleaded guilty to helping Rothstein, who admitted in 2010 that he persuaded wealthy investors to buy stakes in what he said were payouts from settlements of sexual-harassment and workplace-discrimination cases. The cases were fabricated, using forged documents and fictitious plaintiffs and defendants, the SEC said.
“Levin and Preve fueled Rothstein’s Ponzi scheme with the false sense of security they gave investors,” Eric Bustillo, head of the SEC’s Miami office, said in the agency’s statement. “They promised to safeguard investors’ assets, but gave Rothstein money with nothing to show for it.”
The SEC is seeking disgorgement of ill-gotten gains and unspecified financial penalties. The agency’s investigation is continuing, according to the statement.
In a joint statement, attorneys for Levin and Preve said their clients were “two of the biggest victims” of Rothstein’s fraud.
“Mr. Levin and Mr. Preve have testified at length on multiple occasions before the SEC and have provided many thousands of pages of documents to the SEC to assist it in its investigation,” according to the statement. “Their extensive cooperation, and the detailed written submissions of counsel for Mr. Levin and Mr. Preve, showed that Mr. Levin and Mr. Preve were not involved in the Ponzi scheme and were deceived and defrauded by Mr. Rothstein.”
The two men began raising money to purchase settlements in 2007 by offering short-term promissory notes and interests in a private fund that invested exclusively with Rothstein, the SEC said. As the scheme collapsed and Rothstein stopped making payments to earlier investors, Levin and Preve kept touting the success of their investment strategy, the agency said.
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