Indianapolis, INThe Securities and Exchange Commission (SEC) has filed a securities lawsuit against an Indianapolis firm, alleging the company was involved in a Ponzi scheme. The SEC has laid charges against several people for alleged securities fraud in which principals in the firm used investments to pay themselves and cover previous offerings.
According to a news release from the SEC, Veros Partners executives and associates raised at least $15 million from approximately 80 investors who were told their money would be used for short-term operating loans to farmers - loans that pay for seed, equipment and other operating expenses. Instead, the money was used to cover unpaid offerings on prior loans. The SEC’s complaint notes that in 2013, approximately $2.8 million was used to pay off earlier farm loan offerings.
“To date, less than $5 million of the approximately $12 million in loans owed in connection with the 2014 Offering have been repaid,” the complaint notes. “All but one of the loans in the 2014 Offering are past due and, according to the Defendants, the loans, most of which included unpaid balances from prior years, will not be repaid in the near future.” Furthermore, the SEC alleges, by July 15, 2014, two of the defendants knew that more than $3 million was still owed on farm loans, but they did not tell investors, although they accepted new investments.
Meanwhile, three people involved in the scheme paid themselves more than $800,000 in “success” and “interest rate spread” fees. The lawsuit alleges that the fees were not disclosed to investors before they invested.
The SEC has issued an emergency asset freeze and a temporary restraining order. Prior to this complaint, Veros had approximately 300 clients and managed around $160 million in client assets.
Ponzi schemes are financial schemes in which money from newer investors is used to pay returns to older investors, instead of using money that is earned by the operator or fund. Ponzi schemes generally continue until there are no more new investors to fund the returns to older investors. One of the most infamous of the Ponzi schemes was that run by Bernard Madoff.
The lawsuit is United States Securities and Exchange Commission, v. Veros Partners et al, case number 15-cv-659, in the US District Court for the Southern District of Indiana.
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