The Securities and Exchange Commission announced today that it has filed a complaint against two of the men who provided investors for Scott Rothstein's Ponzi scheme.
The SEC says George Levin and Frank Preve helped Rothstein raise more than $157 million in his billion-dollar scheme by getting investors to purchase discounted legal settlements that didn't actually exist, lying to investors "that they had procedural safeguards in place to protect investor money when in fact they often purchased settlements without first seeing any legal documents or doing anything to verify that settlement proceeds were actually in Rothstein's bank accounts."
(Bloomberg reported in 2009 that bankruptcy records showed that Banyon Investments, Levin's Fort Lauderdale hedge fund company, invested $775 million in the scheme.)
Levin and Preve also allegedly continued sucking in investors even as the scheme was collapsing.
"Levin and Preve fueled Rothstein's Ponzi scheme with the false sense of security they gave investors," said SEC regional director Eric I. Bustillo. "They promised to safeguard investors' assets, but gave Rothstein money with nothing to show for it."
The SEC is taking the two to court to get "disgorgement of ill gotten gains, financial penalties, and permanent injunctive relief against Levin and Preve to enjoin them from future violations of the federal securities laws."
Preve was the CEO of Levin's hedge fund and Rothstein said in his depositions last year that Levin knew about and assisted in the scam. There are lawsuits against Banyon that have been stalled, according to the South Florida Business Journal, because of bankruptcy proceedings. More to come.
