In December, the Securities and Exchange Commission filed an emergency action to shut down a multi-million-dollar Ponzi scheme perpetrated by an individual who capitalized on his veteran status to target the retirement funds of his fellow soldiers.
“He used investor funds to pay personal expenses, including exotic cars, private-jet travel, jewelry, gambling, and his wedding aboard the Queen Mary.”
According to the SEC’s complaint, Marco “Sully” Perez claimed he went from “military to millionaire” and offered investments in a company he said bought sand for use in oil and gas drilling. The sand would then be sold to drillers at a markup, generating guaranteed returns ranging from 10% to 100% in as little as 30 days. Perez used these tactics to raise at least $9.25 million from approximately 265 investors.
According to the complaint, however, Perez’s investment program was fraudulent. The business used little, if any, investor funds for acquiring sand and did not have the agreements to sell sand to drillers.
Pilfered to pay personal expenses
Instead, the SEC alleges that Perez used investor funds to make Ponzi payments and to pay personal expenses, including exotic cars, private-jet travel, jewelry, gambling, and his wedding aboard the Queen Mary.
The SEC also alleges that Perez gave investors false account statements that he had fabricated to show phony sand transactions and non-existent investment returns.
Many fraudsters take advantage of the trust that having something in common creates, such as being a military veteran. This is called “affinity” fraud.
On December 14, 2021, the U.S. District Court for the Western District of Texas issued a temporary restraining order halting the defendants’ ongoing offering, freezing the defendants’ assets, and granting other emergency relief.
The SEC’s complaint charges Perez and his company, Permian Basin Proppants, Inc., with violating the antifraud and securities registration provisions of Sections 5(a), 5c, and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, civil penalties, and disgorgement of ill-gotten gains, with prejudgment interest, against Perez and Permian.