U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21511 / May 4, 2010
Securities and Exchange Commission v. Matthew John Ryan and Prime Rate and Return, LLC, individually and doing business as American Integrity Financial Co., United States District Court for the Northern District of New York, Civ. Action No. 1:10-cv-00513-NAM-RFT (filed May 3, 2010)
SEC Halts Albany-Area Ponzi Scheme Preying on Senior Citizens
The Securities and Exchange Commission charged Matthew J. Ryan, a Troy, N.Y.- based financial professional, with operating a Ponzi scheme through American Integrity Financial Co. The SEC obtained an emergency court order to freeze the assets of Ryan and the other defendant, Prime Rate and Return, LLC, which also does business as American Integrity.
The SEC alleges that since at least 2002, Ryan and Prime Rate have used American Integrity, an entity that exists in name only, to raise more than $6.5 million from investors — many of them in their 60s and 70s — by promising them "guaranteed" fixed rates of return ranging from 3.85% to 9% annually. Ryan obtained these investments by fostering the false impression that American integrity is a legitimate, substantial financial services firm, with numerous employees and for which he was merely an employee, and by offering safe, even guaranteed, investments, including qualified individual retirement accounts ("IRAs"). To perpetrate this fraud, Ryan used devices such as a phony Manhattan address, and fictitious names and titles of purported American Integrity employees, and he misrepresented to investors that their investments were safe and insured by the Federal Deposit Insurance Corporation ("FDIC") or the Securities Investor Protection Corporation ("SIPC") and that American Integrity was qualified to offer IRAs and other tax-deferred investments.
According to the SEC's complaint, filed yesterday in U.S. District Court for the Northern District of New York, American Integrity is a classic Ponzi scheme. American Integrity is not even an entity, let alone an operating financial company and investments in it are not in any way insured. It is merely the name on a bank account that Ryan opened and controls. Ryan simply took investors' money and deposited the money into the bank account. When he needed money to pay investors the returns he had promised or principal amounts they sought to withdraw, Ryan simply withdrew funds from the same bank account. He also used the investor funds to pay real estate lenders on properties he and Prime Rate owned and to pay for his own personal expenses, including luxury cars. As of March 31, 2010, it appears that American Integrity owed investors at least $3.5 million, while it had less than $8500 in cash on hand.
In addition to violations of the antifraud provisions of the Securities Act and the Exchange Act, the complaint charges that the defendants violated Section 5 of the Securities Act by illegally conducting an unregistered offering of securities. Ryan, age 45, is a resident of Troy, New York. According to the SEC's complaint, for most of the relevant period, Ryan was a registered representative of a registered broker-dealer and operated out of a branch office of the broker-dealer located in Troy. Ryan also sometimes operated under the name "Matthew J. Ryan & Associates." Ryan is the founder, owner and sole managing member of Prime Rate.
The Honorable Norman A. Mordue, Chief Judge of the U.S. District Court for the Northern District of New York granted the SEC's request for a temporary restraining order and asset freeze against the defendants and for a temporary receiver over Prime Rate and other emergency relief including expedited discovery and an order prohibiting the destruction of documents. Judge Mordue appointed Paul A. Levine, Esq., of Lemery Greisler, LLC, as the temporary receiver and scheduled a preliminary injunction hearing for May 13, 2010.
The Commission seeks an order preliminarily, and a final judgment permanently, restraining and enjoining the Defendants from violations of Sections 5(a) and 5(c) and Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; an order freezing the assets of the Defendants during the pendency of the litigation pending further order of the court, and a final judgment ordering the defendants to disgorge their ill-gotten gains and pay prejudgment interest and imposing civil penalties under Section 20(d) of the Securities Act and Section 21(d)(3) of the Exchange Act.
See Also: SEC Complaint