The Securities and Exchange Commission announced an emergency filing and temporary restraining order against a registered investment advisor to halt an alleged Ponzi scheme targeting senior citizens.
According to the complaint, from at least January 2018 through the present, Paul Horton Smith Sr. sold the securities in Southern California.
Through free workshops and other investor events, Smith allegedly promised investors guaranteed annual interest payments between 3% and 10.5% if they invested in so-called “private annuity contracts.”
In reality, according to the complaint, Smith did not invest the funds raised in any securities and instead used new investor funds to pay investor returns in a Ponzi-like fashion.
He offered the phony products through his company Northstar Communications LLC and used his investment advisory firm eGate LLC and insurance and estate planning company Planning Services Inc, to market the products.
The SEC says Northstar raised more than $5.6 million from at least 35 investors and paid out $5.2 million to those investors as interest payments or principal returned. Smith also allegedly used investor funds to settle investor fraud lawsuits.
Smith is charged with violating the antifraud provisions of the federal securities laws. The complaint seeks injunctions, the return of ill-gotten gains plus interest, and civil penalties.
Court action
On May 20, in addition to granting a temporary restraining order and an asset freeze, the court ordered an accounting and appointed a temporary receiver. A hearing is scheduled for June 3, 2020, to consider continuing the asset freeze, issuance of a preliminary injunction, and appointment of a permanent receiver.
“As alleged in our complaint, Paul Horton Smith Sr. raised millions of dollars by touting his purported investment expertise and guaranteeing returns,” Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office, said in a statement. “Investors should be wary of investments promising no risk and high returns, which are classic warning signs of investment fraud.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
