$6M Ponzi scheme ripped off seniors, lost half its money to 'calamitous trading strategy,' SEC says
Two Florida men stand accused of ripping off dozens of senior citizens and small business owners with a multimillion-dollar Ponzi scheme.
The Securities and Exchange Commission announced Wednesday that it filed an emergency action to freeze assets belonging to Neil Burkholz and Frank Bianco and their two companies, Palm Financial Management and Shore Management Systems.
The men took in about $6 million from 55 investors. Since 2014, they inappropriately paid themselves hundreds of thousands of dollars while losing most of the investors’ funds with a “calamitous trading strategy,” SEC officials said. They also repeatedly used new investors’ money to make payments to earlier investors.
At one point, the men claimed to have a return on investment as high as 34 percent during a period when the fund actually lost 55 percent of its value, according to the SEC’s complaint. During another period, Bianco claimed to investors that the Shore Fund had a year-to-date 109.3 percent return on investment. In reality, it and its successor account lost about 48 percent of its value.
Between February 2014 and May 2019, Bianco and Burkholz wrote themselves or their eponymous companies more than 120 checks from investor funds, officials said. The men are accused of misappropriating about $880,000 in investor funds they gave to themselves.
Palm Financial appeared to still be soliciting new investors as of Wednesday evening via its website, which features a photo with a stock image with the company’s watermark on it and questions whether “stock markets [are] behaving like the next ‘Matrix’ movie?”
As recently as September, an investor has put in $123,000 with Palm Management, officials said. And the men have been putting some investors’ funds this year into another entity called Wiles Systems.
The seal of the U.S. Securities and Exchange Commission hangs on the wall at SEC headquarters in Washington. (REUTERS/Jonathan Ernst)
The victims include a 65-year-old Florida man who put in his $130,000 “house closing investment,” a 52-year-old Michigan man who invested $249,000 from his 401(k) and a 77-year-old Florida woman who invested about $1.1 million — “virtually her entire life savings,” SEC attorneys said in court filings.
The SEC’s complaint accuses the men and their companies of two counts of securities fraud and one count of unjust enrichment.