The U.S. Securities and Exchange Commission (SEC) accused two ex-brokers of unregistered securities sales as part of a $22 million Ponzi scheme fronted by a fake airport project in Belize.
According to the authorities, former Paulson Investment Co. LLC employees Minish "Joe" Hede and Kevin Graetz sold $9.6 million in dubious promissory notes issued by Belize Infrastructure Fund I LLC -- without Paulson’s knowledge.
Brokers Scammed Investors & Former Employer by Selling Away
FINRA’s regulatory rules and Paulson’s internal policies prohibit such “selling away,” which is the practice of selling securities outside of firm and without the firm’s approval.
Securities Sales Done by Duo Were Illegal
The SEC explained that the scheme began in January 2015, when Mr. Hede and Mr. Graetz partnered with Belize Fund boss Brent Borland.
Mr. Borland pled guilty to fraud and conspiracy charges in February 2019. Based on his criminal record, he tricked roughly 40 investors out of approximately $22 million. Out of those 40 investors, 21 were brought in by Mr. Hede and Mr. Graetz from Paulson, ultimately costing them a combined $9.6 million.
According to official records, Borland is still awaiting sentencing.
According to the filings, in 2014, Paulson declined to offer or sell the Belize Fund notes to its clients after the brokers introduced Borland to the firm's executives. Nevertheless, the brokers sold the notes to their and Paulson’s mutual customers and kept for themselves the commissions generated from those transactions for themselves.
Mr. Hede and Mr. Graetz tried to conceal their illegal activity from Paulson by using private email addresses to communicate with investors about the Belize Fund and directing clients not to contact Paulson about the investments. But, according to the Commission, when the firm confronted them, Mr. Hede and Mr. Graetz lied by alleging that Borland was using their names to sell notes without their permission.
Both brokers were fired in April 2017 following an internal investigation sparked by a client's complaint to Paulson about the Belize Fund. And in November of that same year, FINRA barred Mr. Hede and Mr. Graetz from working as brokers.
Based on the filing, the SEC seeks disgorgement and fines in undefined amounts, among other relief.
Consult an Experienced Securities Fraud Attorney
Dimond Kaplan & Rothstein, P.A. has vast experience with cases related to securities fraud schemes that have resulted in massive losses for investors. The firm has successfully represented numerous securities fraud victims who have lost money as a result of a Ponzi scheme and other frauds throughout the country.
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