The Securities and Exchange Commission ("SEC") announced on January 11, 2010 that it has charged Beverly Hills, California-based NewPoint Financial Services, Inc. and its co-owners and controller for conducting an unregistered securities offering fraud aimed at Iranian-Americans in the Los Angeles area. The SEC obtained an emergency court order to freeze their assets and preserve remaining funds that were collected from investors.
The SEC's complaint alleges that NewPoint, co-owners John Farahi and Gissou Rastegar Farahi, and its controller Elaheh Amouei targeted investors in the Iranian-American community by touting NewPoint on a daily finance radio program that John Farahi hosts on a Farsi language radio station in the Los Angeles area. The SEC alleges that the Farahis or Amouei would make appointments with interested listeners to discuss investment opportunities, and that they misled more than 100 investors into purchasing more than $20 million worth of debentures that they falsely told them were low-risk. Many investors also were falsely told that they were investing in FDIC-insured certificates of deposit, government bonds, or corporate bonds issued by companies backed by funds from the Troubled Asset Relief Program (TARP). The SEC alleges that most of the money raised was instead transferred to accounts controlled by the Farahis to, among other things, fund construction of their multi-million dollar personal residence in Beverly Hills.
The Farahis and Amouei "lured victims with false promises of investment safety while secretly enriching themselves and diverting investor funds for their personal use," said Rosalind R. Tyson, Director of the SEC's Los Angeles Regional Office.
The SEC's complaint further alleges that to the extent investor funds were not diverted for the Farahis' and Amouei's own personal use, the money was used to make risky options futures trades in which the Farahis lost more than $18 million in 2008 and the beginning of 2009. The SEC further has alleged that since approximately June 2009, John Farahi and Amouei have made further misrepresentations to investors in an effort to lull them into keeping their money with NewPoint, saying that their money is safe and that they are guaranteed to get the entirety of their investment back. According to the SEC's complaint, NewPoint lacks sufficient funds to make all investors whole, and John Farahi has been paying back some investors on a selective basis while failing to return money to other investors asking for a return of their investment.
The SEC has obtained a court order (1) freezing the assets of NewPoint, and the Farahis; (2) appointing a temporary receiver over NewPoint; (3) preventing the destruction of documents; (4) requiring accountings from NewPoint, and the Farahis; and (5) temporarily enjoining NewPoint, the Farahis, and Amouei from future violations of the registration and antifraud violations of the federal securities laws. The SEC also seeks preliminary and permanent injunctions and civil penalties against the defendants and disgorgement with prejudgment interest against NewPoint and the Farahis.