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SEC Says Offshore Bank Accounts Used in Fraudulent Scheme

Fund manager Daniel Spitzer convinced at least 400 investors that their confidence in him was well placed and that they would be amply rewarded through their investments in his various funds.

And then the Securities and Exchange Commission ("SEC")intervened, announcing on Monday, June 28, that it was bringing fraud charges against Spitzer, as well as levying an emergency freeze against his personal and company assets.

The SEC alleges that, rather than operating a legitimate business with his investors' best interests in mind, Spitzer was involved in a Ponzi scheme and using offshore bank accounts to defraud investors of millions of dollars since at least 2004

According to the SEC's complaint, investors were led to believe that their money would be invested in funds that would ultimately be reinvested in foreign currencies. Spitzer told his clients that he had never lost money in any of his funds.

Of more than $105 million received from investors, though, the SEC alleges that only about $30 million was ever invested. Most of this money was later liquidated and used to repay investors. The SEC states that this arrangement was on the verge of unraveling, and that Spitzer was delaying or outright avoiding paying investor redemptions.

Throughout the life of the scheme, the SEC maintains that Spitzer lived an opulent lifestyle, even spending close to a million dollars at a Las Vegas casino.

One reason that investors were deceived owed to Spitzer's issuance of false Schedule-K information that indicated profitable returns on their investments. Spitzer had been receiving investment money well into 2010, the SEC complaint noting that he received $100,000 from an investor in March that he used to pay other investors and expenses.

Related Resource: "SEC Halts $105M Ponzi Scheme by U.S. Virgin Islands-Based Money Manager" June 28, 2010.

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