SEC moves to halt pyramid scheme promoted through Facebook, Twitter

Regulator freezes assets of overseas firm that had bilked $300,000 from 15 U.S. investors

Mar 5, 2014 @ 5:15 pm

By Trevor Hunnicutt

Securities regulators Wednesday worked to halt a pyramid scheme they said is being operated by people outside the U.S. and promoted on social media, promising unrealistic returns to investors.

The Securities and Exchange Commission said it had obtained a federal court order to freeze the assets of two companies, collectively known as Mutual Wealth, that promoted returns of 2% to 3% a week for new investors through a high-frequency trading strategy. The order also enables the firm's website to be shut down, the SEC said.

“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” Gerald W. Hodgkins, an associate director in the SEC's Division of Enforcement, said in a statement. “Fortunately, we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gained more momentum.”

(Read about this alleged 18-year Ponzi scheme.)

Regulators said the firm falsely claimed to be “duly registered” with the SEC and solicited at least $300,000 from 150 investors through Facebook and Twitter. It encouraged investors to recruit other prospects “in exchange for a referral fee or commission.”

The money was diverted to offshore bank accounts held by shell companies in Cyprus and Latvia, the SEC said.

Late Wednesday, despite the court order, Mutual Wealth's professionally designed website was still accessible. Reached at the Hong Kong telephone number listed on the website, a receptionist who gave her name as Brenda said she could not comment on the SEC's claims.

“I don't have any knowledge of the procedures for investments,” she said. “I can pass the info on to somebody who could be able to assist you.”

(See also: Stanford fraud suits allowed by Supreme Court)

On Facebook, the firm has nearly 22,000 “likes” by users. It has 1,159 Twitter followers.

The firm, which has a separate website for financial advisers looking to place their clients' money, claims to bring “the benefits of high-frequency trading to the general public.”

An SEC complaint was filed in the U.S. District Court for the Central District of California, naming no known backers of the enterprise.

“Almost nothing Mutual Wealth represents to its investors is true,” the complaint said, noting that the Hong Kong headquarters do not exist. “Upon information and belief, Mutual Wealth's sole shareholder and director, as with every person claiming to represent Mutual Wealth, is a fiction. The real operators of Mutual Wealth are using fictitious names, address and other information to further their fraud.”

–Mason Braswell contributed to this story.

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