On August 29, 2011, the Securities and Exchange Commission sued James Risher and Daniel "DJ" Sebastian for running the Jade Asset Ponzi scheme. The fraudulent investment funds involved are the "Managed Capital Fund," the "Safe Harbor Private Equity Fund," or the "Preservation of Principal Fund" (collectively, the "Fund"). This appears to be another one of the many Ponzi schemes uncovered over the last few years that have caused billions of dollars in investment fraud losses. If you bougth the Fund from a brokerage firm, you may be able to recover your investment losses in a FINRA arbitration based on claims of stockbroker negligence or brokerage firm negligence.
According to the SEC, from no later than January 2007 through July 2010, Risher and Sebastian operated a Ponzi scheme and raised approximately $22 million from more than 100 investors located primarily in Florida, California, and Canada. Many of the investors were Florida teachers and retirees, and many were Sebastian's former insurance customers who were persuaded to roll over the money in their insurance and annuity products into the Fund.
The SEC has alleged that Sebastian directed investors to send their investments by wire or check to a bank account in the name of Jade Asset Group, which was under Risher and his wife's exclusive control. Some investors also made their investment checks out to Capital Trading Partners, LLC, Managed Capital, LLC, and Isle FX Trading, LLC, all controlled by Risher.
Investors were told that the Fund would provide a higher rate of return than insurance policies and annuities and that the Fund would invest only in blue chip stocks, exchange-listed equities, options, and other investment vehicles, depending on the strategy employed. In reality, Risher invested only a fraction of investor funds. Instead, he misappropriated the majority of the money for personal use, including $4.8 million in fees based on the Fund's fictitious returns,$3.2 million for jewelry, gifts, and purchases of real property in North Carolina and Florida, and $1.3 million to cover personal expenses such as credit card and property tax payments.
As part of the fraud, Risher and Sebastian provided investors with account statements and newsletters reflecting and discussing fictitious investment returns and trades that never took place. They also allegedly misrepresented that the Fund's financial statements were audited and failed to disclose that Risher had spent 11 years in prison after being convicted of numerous crimes including securities and mail fraud. At bottom, Risher defrauded investors by repeatedly representing investment returns to investors even though he knew the Fund had no meaningful source of income other than money from new investors.
