SEC Charges Two Men For Ponzi Scheme in Collateralized Mortgage Obligations

The Securities and Exchange Commission (SEC) and the U.S. District Court for the District of Utah, handed down final judgments against two men last week that they accused of running a ponzi scheme that defrauded more than 50 investors out of more than $7 million. Tyson Williams and Stanley Parrish were accused of defrauding the investors through the sale of securities in ST Ventures. They told investors that ST Ventures would purchase collateralized mortgage obligations, a type of mortgage-backed security, and then leverage them to produce a large return for the investors within 30 to 90 days. The SEC also claimed that Williams and Parrish made “material misrepresentations and omissions” regarding the investment including the risk of the investment and the use of investor funds. They also told the investors that their investment principal would “never be at risk of loss,” because investing in CMOs is a “very safe and liquid investment.” They told the investors that their funds would only be used to purchase CMOs.

In reality, the men ran a ponzi scheme, with more than $1.5 million in payments made to old investors with new investor money. The men also misappropriated over $3.5 million of investor money for their personal use. Last week, the District Court for the District of Utah ordered Williams and Parrish to pay a disgorgement of $3,111,484.89, prejudgment interest of $1,067,778.29 and a civil penalty in the amount of $130,000.