U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23021 / June 13, 2014
Securities and Exchange Commission v. Lawrence P. Schmidt, Commercial Equity Partners, Ltd, FutureGen Company (d/b/a FutureGen Capital), FGC Distressed Assets Investment #1, LLC; FutureGen Capital DDA CG Fund LLC; FGC Tax Lien Fund #2, LLC; FGC Trading Fund #1 LLC; FGC SPE NO 1 LLC; FGC SPE NO 2 LLC; and FGC CM Note Fund LLC, Civil Action No. 1:14-cv-01002
SEC Obtains Emergency Relief Against Alleged Perpetrators of Tax Lien Investment Scheme
The Securities and Exchange Commission today announced that on June 12, 2014 it filed an emergency action in the United States District Court for the District of Columbia against Lawrence P. Schmidt, a Washington D.C. resident, and several entities he controlled for defrauding investors across the country in an investment scheme involving unregistered debt offerings.
The Complaint alleges that Schmidt defrauded investors by creating a web of seemingly legitimate companies, including Commercial Equity Partners, Ltd., and FutureGen Company ("FutureGen"), that were in fact simply designed to entice investment and conceal his misuse and commingling of funds. Over a six year period, from 2008 through 2014, Schmidt raised nearly $22 million from over 200 unsuspecting investors who purchased notes from the various companies, siphoning off almost $2 million of investor funds for his own benefit, paying old investors with new investor money and ultimately firing all his employees and fleeing the country when his scheme collapsed. The notes had interest rates ranging from approximately 7% to 13% annually, with the proceeds to be used by the companies to purchase tax liens, distressed assets, and to provide commercial bridge and multi-family property loans. In reality, the companies did not invest the proceeds as promised. None of the relevant offerings were registered with the Commission, nor were the defendants registered.
The Complaint claims that, based on this conduct, Schmidt and his companies violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, that Schmidt is liable as a control person of the companies under Section 20(a) of the Exchange Act and that Schmidt is liable under Suction 20(e) of the Exchange Act for aiding and abetting his companies in their violations of the Exchange Act . On the Commission's motion, the Court issued an Order Freezing Assets, Appointing a Receiver, Granting a Temporary Restraining Order and Other Emergency Relief, and Issuing an Order to Show Cause on a Preliminary Injunction on June 12, 2014. Among other things, the Court's Order froze the assets of the defendants and provided for the appointment of a temporary receiver to preserve the property and assets of the companies and respond to investor inquiries. A hearing for a preliminary injunction has been set for June 26, 2014.