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SEC Announces Charges in South Florida Ponzi Scheme

On May 22, 2012 the SEC announced the filing of a complaint in Federal District Court in the Southern District of Florida alleging violations of federal securities laws by two Fort Lauderdale residents – George Levin and Frank Preve. The SEC alleges that Levin and Preve raised over $157 million from 173 investors in less than two years by issuing promissory notes from Levin’s company and interests in a private investment fund they created in 2009. The funds were used to purchase bogus legal settlements from a former prominent Florida attorney, Scott Rothstein, who used investor funds to make payments due other investors and is currently serving a 50-year prison term as a result. The SEC’s complaint notes that Levin and Preve’s fund, Banyon Income Fund, was the largest source of capital for Rothstein’s Ponzi scheme. The SEC’s complaint alleges the fund’s private placement memorandum, which Levin had ultimate responsibility for, stated that there were safeguards in place to protect investor money. In reality, though, the fund purchased the fake settlements without seeing any legal documents or taking any steps to verify their legitimacy. Further, the SEC alleges that even as Rothstein’s scheme was collapsing, Levin and Preve sought new investor money, touting the success of their “investment strategy” and falsely stating the fund had collected half of the $1 billion in settlements it had purchased previously, and was due another $550 million. By the time the fund offering began in May 2009, however, Rothstein had apparently ceased making payments on those settlements. Bankruptcy court records from 2009 showed that the fund invested $775 million in Rothstein’s Ponzi scheme. For additional information case or any other securities law concern please contact us at (619) 298-2880.

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