On Friday, the Securities and Exchange Commission announced that it had frozen the assets of Lancelot Management LLC, which had fed approximately $2 billion to the alleged Ponzi Scheme that was operated by Minnesota businessman Thomas Petters. The SEC's complaint alleges Lancelot Management and its founder Gregory Bell of Highland Park, Illinois, collected millions in fraudulent fees at the expense of their clients. The complaint also claims that Mr. Bell participated “in a series of sham transactions” to help Mr. Petters conceal illicit loans.
Robert Khuzami, Director of the SEC's Division of Enforcement, stated that "Greg Bell portrayed himself as a helping hand to investors — avidly protecting their funds and verifying the legitimacy of Petters's business. But behind their backs, he was handing over billions of dollars of his clients' money to feed a fraud."
According to the SEC, “Petters carried out his Ponzi scheme from as early as 1995 through September 2008, promising investors that proceeds from the notes they were sold would be used to finance the purchase of vast amounts of consumer electronics by vendors who then re-sold the merchandise to "Big Box" retailers including such well-known chains as Wal-Mart and Costco. Instead, the "purchase order inventory financing" business was a complete sham, and the vendors secretly returned most investor money back to Petters, who diverted billions of dollars for his own purposes.”
The SEC's complaint alleges:
“False Assurances — Bell and Lancelot Management falsely assured investors that they were taking specific steps to protect investor money and to verify the legitimacy of Petters's financing business, when in fact they did not. Bell and Lancelot Management also failed to inform investors that Petters was previously convicted of multiple crimes involving fraud and deception.
Bogus Roundtrips — Beginning around February 2008 after Petters had been delinquent for months in repaying more than $130 million of notes, Bell and Petters concocted a series of bogus "roundtrip" payments to conceal Petters's delinquencies. Bell and Lancelot Management on multiple occasions sent money directly to Petters's company under the pretense that the money was for investment in a new note. Petters, through his employees, then returned the money to Bell and Lancelot Management, typically on the same day. It was packaged as the repayment of one of the outstanding debts owed to the Lancelot hedge funds.
Wrongful Withdrawals — During the final months before the collapse of the Petters Ponzi scheme, Bell and Lancelot Management wrongfully withdrew more than $40 million from the Lancelot Funds as purported fees. Bell and Lancelot Management also transferred millions to an account he controls jointly with his wife as well as a revocable trust in his name and a revocable trust in his wife's name. Bell also transferred millions to an account in Switzerland for the benefit of a third trust.”
|
