N.J. AG sues investment firm over ponzi scheme
NEWARK, N.J. (Legal Newsline) - New Jersey Attorney General Paula Dow announced on Tuesday that she has filed a lawsuit against an investment firm that allegedly defrauded investors out of more than $40 million in a Ponzi scheme.
Dow and the Bureau of Securities filed the suit against Carr Miller Capital LLC of Marlton, N.J., Everett Charles Ford Miller, president of Carr Miller Capital, and Ryan Jude Carr and Brian Patrick Carr, cousins and employees of Carr Miller Capital.
The defendants allegedly carried out a Ponzi scheme and engaged in other actions that defrauded investors, including violating numerous New Jersey Uniform Securities Laws by committing fraud, commingling funds and selling unregistered securities.
The assets of Miller and his companies were frozen on Monday. Judge Kenneth Levy will appoint a receiver who will oversee and control those assets. The judge also approved the appointment of a fiscal monitor for the Carrs and one nominal defendant.
The state seeks restitution for investors, disgorgement of profits and the imposition of civil penalties against the defendants.
The Bureau of Securities on Tuesday revoked the Investment Advisor registrations and/or exemptions of Carr Miller Capital, Capital Markets Advisory LLC, Miller, Brian Carr and Ryan Carr. This will effectively bar them from engaging in the securities industry in the state.
"We charge that these defendants operated a Ponzi scheme for their own enrichment at the expense of investors," Dow said. "Instead of investing funds to produce high rates of return as promised, we allege that the defendants spent investors' hard-earned money on personal luxuries and indulgences."
Carr Miller Capital allegedly offered nine month notes that purportedly provided rates of return between 10 percent and 15 percent a year. The defendants allegedly told investors it would be possible to renew the notes for another nine month term or they could be paid out when the term ended.
It is believed that $8 million was sent to investors disguised as "interest" payments, but the money allegedly really came from new investors' capital.
"These defendants operated a classic Ponzi scheme, using funds from new investors to pay money to earlier investors, all in an attempt to perpetuate the deception," Thomas R. Calcagni, Acting Director of the Division of Consumer Affairs, said. "The promised rates of return sounded too good to be true and, sadly, that turned out to be the case."
Four of the counts allege that the defendants made false statements and omitted material facts when dealing with the investors. They also allegedly deployed invested funds for unauthorized uses.
The suit alleges that $13.5 million of the money that came from investors was used to pay for a New Jersey Devils sky box at the Prudential Center in Newark, as well as vehicles, luxurious meals and travel vacations. Another $16 million was allegedly used for various hedge funds, film production companies, real estate and other investments that weren't authorized by investors.
Counts V and VI of the state's complaint allege that the securities offered by the defendants were not registered for sale in New Jersey and that Ryan Miller was not registered to act as an agent.
"Unregistered investments and unregistered individuals should be an immediate red flag to potential investors," Marc B. Minor, chief of the N.J. Bureau of Securities, said. "The bureau is a resource that investors can use to perform due diligence as they decide how and with whom to invest."