On June 22, 2010, the US. Securities and Exchange Commission (SEC) announced that it has charged a Palm Beach Gardens, Florida investment adviser and two of its principals with fraud for running a Ponzi scheme and stealing client funds. The SEC alleges that Trade-LLC, and its principals, Philip W. Milton and William Center, convinced three private investment clubs, with more than 800 members nationwide, to entrust Trade-LLC with their investment funds so that Trade-LLC could trade securities on behalf of the investment clubs using purported proprietary software trading program.
According to the SEC's complaint, between 2007 and 2009, the three investment clubs invested nearly $28 million with Trade-LLC based on promises that Trade-LLC could generate significant returns. On a monthly basis, Trade-LLC provided the investment clubs with reports showing that Trade-LLC purportedly was generating returns of up to 8% a month, or approximately 100% on an annualized basis. In truth, Trade-LCC actually was losing money, and in total sustained trading losses of more than $2 million.
The SEC complaint also alleges that Trade-LLC, Milton, and Center operated a Ponzi scheme by using the investment clubs money to pay back to the investment clubs more than $1 million in fictitious profits. Moreover, the SEC's complaint alleges that Milton and Center illegally used the investment clubs' money to pay themselves salaries of more than $2 million and $1 million, respectively, and to cover more than $1.3 million in business and other unrelated expenses. Milton and Center also transferred, without any legitimate basis, over $4.8 million of the clubs' funds to three Florida companies they controlled.
Trade-LLC and have consented to asset freezes and being placed in receivership, and to disgorge all of the funds that the court determines they received from the fraudulent scheme. Trade-LLC also has consented to pay a civil money penalty to be determined by the court. Milton has consented to a court order permanently enjoining him from violating the anti-fraud provisions of the federal securities laws. The order also directs him to disgorge $2,351,963 in proceeds he received from Trade-LLC and to pay a $130,000 civil money penalty.