US Securities and Exchange Commission (SEC) has charged a New Jersey-based investment adviser Sandra Venetis and three of her firms with operating a multi-million dollar offering fraud involving the sale of phony promissory notes to retired and unsophisticated investors.
The SEC alleged that Venetis told some investors that the promissory notes were guaranteed by the Federal Deposit Insurance Corporation (FDIC) and would earn interest of approximately 6% to 11% per year that would be tax-free due to a loophole in the tax code.
Investors were also told that she would use their money to fund loans to doctors that would be backed by Medicare reimbursement payments to those doctors.
SEC said that instead of making investments, Venetis looted investor funds to pay business debts and personal expenses accrued from international travel, gambling, and home mortgages and property taxes. She also funneled cash to her relatives.
Venetis and the entities have agreed to settle the SEC’s charges and consent to a court order that freezes their assets and requires monetary payments including financial penalties to be determined at a later date.
Venetis also agreed to an SEC administrative action that bars her from future association with any investment adviser or broker-dealer.
SEC Asset Management Unit co-chief Bruce Karpati said that Venetis abused her position of trust to target older investors who were the most vulnerable to her egregious lies and misrepresentations.
“The SEC’s enforcement action and the settlement reached ensure that she will never work in the securities industry again,” Karpati said.