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SEC accuses 6 in gold mining investment Ponzi scheme
SEC Charges Perpetrators of $300 Million Ponzi Scheme
Involving Purported Gold Mining Investments
Press Release
U.S. Securities and Exchange Commission
Thursday, June 10, 2010
http://www.sec.gov/news/press/2010/2010-99.htm
WASHINGTON -- The Securities and Exchange Commission today charged four Canadian men and two others living in Florida with perpetrating a $300 million international Ponzi scheme on investors in a purportedly successful gold mining operation.
The SEC alleges that Milowe Allen Brost and Gary Allen Sorenson of Calgary were the primary architects and beneficiaries of the scheme that persuaded more than 3,000 investors across the U.S. and Canada to invest their savings, retirement funds and even home equity. Brost and his sales team presented themselves as an independent financial education firm that had discovered profitable investment opportunities with companies involved in gold mining. They held seminars where they promised investors they could earn 18 to 36 percent annual returns by investing with these companies, and they claimed the investments were fully collateralized by gold.
Prophecy to Become Coal Producer This Year
with 1.5 Billion Tonnes of Resource
Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen.
For Prophecy's complete press release about its production plans, please visit:
http://www.prophecyresource.com/news_2010_may11.php
Unbeknownst to investors, they were actually investing in shell companies owned or controlled by Brost or Sorenson. Investor funds were often transferred multiple times through numerous bank accounts held as far away as Asia, Europe and South America, and then ultimately used to make "interest payments" to investors, fund the few unprofitable companies that actually had operations, and personally enrich Brost, Sorenson and others involved in the scheme.
"Brost and Sorenson orchestrated a complex, far-reaching fraud disguised by a labyrinth of companies and foreign bank accounts they used to hide their misconduct from investors and law enforcement," said Donald M. Hoerl, director of the SEC's Denver Regional Office.
According to the SEC's complaint, filed in U.S. District Court for the Western District of Washington, Brost and his sales team -- called Structurists -- sold investors shares in a series of shell companies and then put their money through a "structuring" process that culminated with the transfer of funds from Syndicated Gold Depository (SGD) to Merendon Mining Corp. Ltd. -- which was purportedly a successful gold mining and refining company that would pay investors out of its profits. Brost and Sorenson concealed their ownership and control of SGD by using personal aliases, corporate entities and trust agreements with nominee shareholders. Sorenson, who controlled Merendon, claimed to be a successful businessman receiving loans from SGD through arm's-length transactions. Sorenson hosted tours for potential investors at his Honduran refinery and demonstrated the pouring of gold bars while making false claims about the profitability of his company.
The SEC alleges that investor money whirled through accounts located in the U.S. and Canada as well as the Bahamas, Belize, Bermuda, Ecuador, Honduras, Malaysia, Panama, Peru, Portugal, and Venezuela. Brost and Sorenson diverted investor funds for their personal benefit, using millions of dollars to purchase and renovate extravagant homes, ranches, and recreational vehicles. Sorenson also purchased and outfitted a luxury fishing resort in South America.
The individuals charged in the SEC’s complaint in addition to Brost and Sorenson:
-- Larry Lee Adair of Fort Lauderdale, Fla.
-- Ward K. Capstick, a Canadian citizen who lives in Snohomish, Wash.
-- Bradley Dean Regier of Calgary.
-- Martin M. Werner of Boca Raton, Fla.
The SEC's complaint charges four companies: SGD, Merendon Mining Corp. Ltd., Merendon Mining (Nevada) Inc., and the Institute for Financial Learning Group of Companies Inc.
Sorenson's wife and daughter are named as relief defendants in the case in order to recover investor assets now in their possession. Sorenson used investor funds pay off the mortgage of daughter Laura Sorenson and invest in a film production company for her benefit, and he purchased a home and other items for his wife, Thelma Sorenson.
Daniel Konosky, Jonathan Warner, and Jay Scoggins of the SEC's Denver Regional Office conducted the investigation. The SEC's litigation will be led by Leslie Hendrickson-Hughes and Polly Atkinson. The SEC thanks the Long Island office of the Federal Bureau of Investigation, the Brooklyn office of the Internal Revenue Service's Criminal Division, the U.S. Attorney's Office for the Eastern District of New York, and the Alberta Securities Commission for their assistance in this matter.
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Coming Friday-Sunday, June 11-13, at the Dallas-Fort Worth Airport Marriot:
The Anglo Far-East Bullion Co.'s Gold and Silver Conference
The conference will explore the dangers and opportunities in today's bullion markets and the need for investors to diversify bullion holdings outside of bullion banking and commodities markets. Speakers will include David Morgan of Silver-Investor.com, Gold Anti-Trust Action Committee Chairman Bill Murphy, and Duncan Cameron and Philip Judge of Anglo Far-East Bullion Co. The earliest conference attendees on Saturday will be able to schedule one-on-one interviews for personal consultation with Anglo-Far East's experts on Sunday.
To learn more about and register for the Anglo Far-East Bullion conference, please visit:
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