The SEC on Tuesday charged financier Craig Berkman, a former Oregon gubernatorial candidate, with defrauding investors by promising them access to pre-IPO shares of Facebook and other social-media companies.
Agency enforcers allege that Mr. Berkman, who now lives in Florida, falsely claimed he had special access to scarce shares in social-media stocks including Facebook, LinkedIn, Groupon and Zynga, a pitch that allowed him to raise at least $13.2 million from 120 investors, which he used for his own benefit.
In a related criminal action, authorities arrested Mr. Berkman today at his home in Odessa, Fla., and charged him with raising at least $8 million from the scheme and misappropriating the money.
Mr. Berkman is expected to appear today in U.S. District Court for the Middle District of Florida in Tampa, according to the U.S. Attorney's Office for the Southern District of New York and the U.S. Postal Inspection Service.
John B. Kern of Charleston, S.C., was also charged by the SEC with allegedly participating in the fraud as legal counsel to some of Mr. Berkman's companies.
Mr. Berkman's lawyer, Marc Blackman of Ransom Blackman LLP in Portland, did not return a call. A call to Mr. Kern's law firm was not returned.
The SEC's order paints Mr. Berkman as a recidivist. In 2001, Oregon regulators issued a cease-and-desist order and levied $50,000 fine against him for selling promissory notes without a license, according to the SEC's order.
In June 2008, an Oregon jury found Mr. Berkman liable for various charges arising from his involvement with a series of venture capital funds known as Synectic Ventures. The court entered a $28 million judgment against him, the SEC said.
In March 2009, Synectic filed a bankruptcy claim against Mr. Berkman in Florida for his unpaid debts arising from the 2008 judgment. Mr. Berkman agreed to pay $4.75 million in that case, but the SEC now alleges he paid the debt with proceeds from his social-media stock fraud.
The SEC also claims that Mr. Berkman used funds from the fraud to make “Ponzi-like payments” to earlier investors and to fund personal expenses.
Mr. Berkman chaired Oregon's Republican Party from 1989 to 1993 and placed second in the GOP's 1994 gubernatorial primary, according to Willamette Week, a Portland, Ore., news site.