Three Texans allegedly masterminded a $485m fraud
Regulators in US have frozen the assets of three Dallas business men amid allegations that they were running a $485m Ponzi scheme.
The Securities and Exchange Commission (SEC) alleged that Provident Royalties made a series of fraudulent offerings between June 2006 and January 2009 involving oil and gas assets to more than 7,700 investors.
Provident sold some of the securities, but primarily solicited retail broker-dealers to enter into placement agreements for each offering, and those retail broker-dealers sold the stock to retail investors nationwide, according to the complaint.
The scheme falsely promised yearly returns of up to 18%, said the regulator.
In fact, the SEC alleged that less than 50% of investor funds were used for their stated purpose, and the proceeds from later investors were used to pay expenses related to earlier offerings.
Ken Israel, director of the SEC’s Salt Lake regional office, said: ‘[Provident] was actually operating a Ponzi-like shell game in which assets were shuttled from one entity to another and investors were paid ‘returns’ from whatever money was available — usually that of the most recent investors.’
The SEC’s complaint charged Paul Melbye, Brendan Coughlin and Henry Harrison for orchestrating the scheme.