SEC busts Internet scam

May 9, 2008 @ 2:43 pm

By Sara Hansard

The Securities and Exchange Commission obtained an emergency court order freezing the assets of an alleged perpetrator of an Internet Ponzi scheme that reaped $72 million from 3,000 investors in the United States and 30 foreign countries, the agency announced Thursday.

From December 2005 until at least November 2007, Gregory McKnight of Swartz Creek, Mich., and his company, Legisi Holdings LLC, which the SEC said is a shell holding company chartered in Nevis in the West Indies, sold unregistered securities through a website promising to pay as much as 15% interest per month. Nevis is a bank-secrecy haven, the SEC said.

The court order was issued May 5 by the U.S. District Court in Detroit.

The amount of assets frozen, though in the millions of dollars, was not specified in the SEC’s complaint.

Of the $72 million he raised from investors, Mr. McKnight invested only about $33 million, while using $27.5 million to pay off earlier investors and $2.2 million to pay for his personal expenses and to make payments to relatives.

The SEC is seeking unspecific civil penalties from Mr. McKnight and his company.

“McKnight lured investors from around the globe into investing by claiming on his website that the Legisi program was legitimate and unlike other scams and high yield investment programs that you see on the Internet,” Merri Jo Gillette, regional director of the SEC’s Chicago office, said in a press release.

“In fact, McKnight’s Legisi program was just that, a scam from beginning to end,” she said.

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