SEC accuses Calif. man of investment fund scam
WASHINGTON (Legal Newsline) - The Securities and Exchange Commission on Thursday accused John A. Geringer - a Scotts Valley, Calif. investment adviser - with operating a $60 million investment fund scam.
The SEC alleges that he used false and misleading marketing materials to deceive investors to think that the fund was earning double-digit annual returns. Actually, Geringer's trading was losing money and he eventually stopped trading entirely, the SEC says.
Geringer paid millions of dollars in "returns" to investors largely by using money received from newer investors, the SEC says. He also allegedly sent investors periodic account statements showing fictitious growth in their investments.
"Geringer painted the picture of a successful fund weathering America's financial crisis through a diversified, conservative investment strategy," said Marc Fagel, Director of the SEC's San Francisco Regional Office.
"The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements."
According to the SEC's complaint, filed in federal court in San Jose, Calif., Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 - before the fund even existed, the complaint says. The marketing materials also allegedly falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.
Geringer made a number of false statements to investors, according to the SEC's complaint. He allegedly lied to investors on account statements by falsely claiming "MEMBER NASD AND SEC APPROVED." He also allegedly falsely claimed that the fund's financial statements were audited annually by an independent accountant. But no such audits were performed, the SEC says.
The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund's bank account.