SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16649 / August 10, 2000
SEC V. ELFINDEPAN, S.A., SOUTHERN FINANCIAL GROUP, TRACY CALVIN DUNLAP, JR. AND BARRY LOWE, 1:00CV00742 (August 10, 2000)
COMMISSION SEEKS TEMPORARY RESTRAINING ORDER AND ASSET FREEZE ENTERED AGAINST ELFINDEPAN, S.A. AND THREE OTHERS
The Securities and Exchange Commission today filed a fraud case in the United States District Court for the Middle District of North Carolina against Elfindepan, S.A., Southern Financial Group, Tracy Calvin Dunlap, Jr. and Barry Lowe. The Commission's complaint alleges that from as early as March 1999 to the present, the defendants defrauded investors nationwide in an apparent Ponzi or pyramid scheme in connection with the unregistered offer and sale of the securities of Elfindepan, a supposed Costa Rican financial company with offices in Greensboro, North Carolina. Defendants allegedly raised at least $13.5 million from the investing public in at least nine states. The Commission seeks a temporary restraining order that, among other things, would freeze the assets of defendants, including $2.7 million in a South Carolina bank account and prohibit defendants from accepting or depositing additional funds from investors. The Commission also seeks to temporarily restrain defendants from violations of the antifraud and registration provisions of the federal securities laws.
The complaint alleges that in connection with these offerings, defendants knowingly and recklessly made, and caused others to make, numerous materially false and misleading statements to investors. Among other things, defendants promised investors highly favorable returns on investments (as much as 40-50% per month), without any reasonable basis for such claims, and falsely stated that the investments were secure, including false claims that Elfindepan investments were associated with the International Monetary Fund and the World Bank. Investors were told that Elfindepan had been in business for 23 years, when in fact the company was less than a year and a half old.
The complaint also alleges that defendants knowingly or recklessly failed to disclose certain material facts to investors regarding Elfindepan. Defendants have omitted to disclose that funds are in fact being disbursed inconsistent with Elfindepan's supposed business purpose. Investors have not been told that proceeds from later investors are being used to pay early investors and distributors, in classic Ponzi or pyramid scheme fashion. Investors have not been told that Dunlap has complete control of Elfindepan's finances, and has paid substantial amounts of investor money to his family members, and to support his personal living expenses. While defendants claim Elfindepan provides loans to businesses and individuals, and engages in factoring for companies with large receivables and cashflow problems, defendants failed to disclose any of the risks inherent in such activities and therefore in investing in Elfindepan. Defendants have failed to provide investors any detailed information about Elfindepan and its business, including any financial information.
The complaint further alleges that the defendants have publicly solicited investors through a website posted on the internet, through organized investor meetings, and through personal contacts by individuals acting as agents or "distributors" of Elfindepan. Investors were solicited and encouraged to invest moneys from their IRA and other retirement accounts. Defendants Southern Financial and Lowe, of Greensboro, North Carolina, and Dunlap facilitated these transfers, and failed to disclose to investors that monies were not held in IRA custodial accounts.