The Securities and Exchange Commission (SEC) recently charged Joel J. Natario and Jefferson Scott Baker, promoters of a purported merchant cash advance business, with operating a Ponzi scheme that raised more than $10 million from investors.
The SEC’s complaint, filed in the United States District Court for the District of Nevada, charges Natario and Baker with violating Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder – anti-fraud provisions of the federal securities laws.
The SEC complaint alleges that Natario and Baker defrauded approximately 23 investors out of more than $10 million, mostly from a private networking group of entrepreneurs in Tampa, Florida, to which they belonged. They solicited and sold investments in a purported business venture involving merchant cash advances (“MCAs”) — short term loans to small businesses in need of immediate capital. Unlike traditional loans, MCAs are repaid using a percentage of the business’s future credit and debit card sales, plus fees, are not repaid with fixed payments, and are often considered a sale of future receivables.
The SEC alleged that defendants developed and utilized written MCA purchase agreements that falsely stated, among other things, that investor proceeds would be used to fund a portion of the MCAs and that investors would earn rates of return from 16% to 18% for every twelve-week investment period. In reality there was no MCA venture and no MCAs were made, as per the SEC. Instead, purported returns paid to investors were financed, not by actual MCA transactions, but, at least primarily, by other investors’ money.
The complaint further contends that Natario and Baker engaged in additional fraudulent conduct to create the false and misleading appearance that the MCA venture was successfully yielding profits and that investor funds were safe, including by deploying a deceptive online investor portal and disseminating a fake bank account statement to at least one investor. They used an aggregate of approximately $3 million to make Ponzi payments to investors, but also used investor funds to enrich themselves by paying credit card bills, purchase real property, and pay for personal travel and vacations, the SEC maintained in its court papers.
The SEC seeks as against both defendants the following: injunctive relief, disgorgement with prejudgment interest, and civil penalties.
SEC Investigation Defense Attorney David Chase
SEC investigation attorney David Chase, of the Law Firm of David R. Chase, has successfully represented individuals in SEC fraud investigations around the country for more than 25 years after having served as Senior Counsel in the SEC’s Enforcement Division. If you are under SEC investigation, or just received an SEC subpoena and need experienced, strategic advice, contact David at: 800-760-0912 or e-mail him at: david@davidchaselaw.com. Visit the Firm’s website for valuable content and to review the firm’s prior successful defense results at: www.securitiesfrauddefense.net.
