SEC says Oregon firm ran $350 million Ponzi scheme
PORTLAND, Ore. - The U.S. Securities and Exchange Commission has sued an Oregon company and its top executives on accusations they operated a $350 million Ponzi scheme.
The SEC says executives from Aequitas Capital Management told more than 1,500 clients they were using their money for investment purposes. The SEC alleges the executives instead used the money to fund their lucrative salaries, repay prior investors and pay expenses, including "a private jet and pilots, and dinners and golf outings for prospective investors."
The suit filed Thursday in Portland comes a month after Aequitas announced layoffs and hired a consulting firm to wind down the business. The SEC names three top executives as defendants, including Chief Executive Robert Jesenik, who founded the Lake Oswego-based company in the 1990s.
"I'm disappointed that the SEC has also chosen to rush to judgment about the company's management and make sweeping allegations without the benefit of a thorough investigation," Jesenik said in a written statement to The Oregonian newspaper, which was first to report on the troubles at Aequitas. "I look forward to addressing these claims in court."
The 30-page lawsuit states Aequitas was profitable at one time, but things went rapidly downhill in early 2014. An Aequitas subsidiary entered the business of buying private student loans, and got hammered when Corinthian Colleges, a for-profit education provider, collapsed amid fraud allegations.
"Prior to Corinthian's default, (Aequitas Commercial Finance) already relied heavily on raising investor funds to meet its weekly cash obligations," the lawsuit states. "The loss of income from Corinthian heightened ACF's cash crunch and made it even more dependent on investor funds to meet obligations, including redemptions and interest payments to prior investors."
The company, however, continued to send out quarterly updates to investors, falsely stating their money was being used to purchase receivables, the lawsuit alleges. By the end of 2015, the firm owed to $312 million to investors and, according to the SEC, had virtually no operating income to repay them.
The lawsuit seeks civil penalties against the executives and the relinquishing of any ill-gotten gains. It also asks for them to be prevented from working in the securities industry.