SEC Charges Money Manager and Two Associates in New York City-Based Affinity Fraud
FOR IMMEDIATE RELEASE
Washington, D.C., May 26, 2010 — The Securities and Exchange Commission today charged a purported money manager, his New York City-based investment company, and two of his associates with conducting an affinity fraud and Ponzi scheme that specifically targeted investors living in the Caribbean and African-American communities of Brooklyn.
The SEC alleges that Gedrey Thompson, through his firm GTF Enterprises Inc., convinced investors to entrust him with money that he claimed to trade on their behalf. Thompson assured investors that the investments were risk-free and employed "stop-loss" trading techniques, and he guaranteed quarterly returns ranging from 4 to 20 percent.
However, Thompson allegedly invested only a fraction of investor funds and sustained thousands of dollars in trading losses from those investments. He sent investors fake quarterly account statements that hid those losses and instead showed lofty returns. Thompson also made Ponzi-like payments to earlier investors, and he stole thousands of dollars in investor funds to pay for exotic trips and other personal expenses. GTF's account manager Dean Lewis and assistant treasurer Sezzie Goodluck also are charged in the fraud that caused many investors in GTF to lose their life savings.
"GTF and its associates abused a bond of trust with promises of extraordinary returns and risk-free investment opportunities," said George S. Canellos, Director of the SEC's New York Regional Office.
David Rosenfeld, Associate Director of the SEC's New York Regional Office, added, "Thompson and his cohorts exploited members of their own community by using phony trading credentials and bogus account statements to legitimize their fraud."
According to the SEC's complaint, filed in U.S. District Court for the Southern District of New York, Thompson with assistance from Lewis and Goodluck raised a total of more than $800,000 from at least 20 investors from at least 2004 to 2009. Thompson primarily sought investors who were similarly from the Caribbean and now living in the New York area, convincing them to entrust him with their money that he claimed to trade on their behalf in options, futures, commodities, or other securities.
The SEC alleges that Thompson and Lewis made a number of false or misleading representations to con investors. For example, they claimed that GTF practiced sound and careful investing and assumed all trading risk. They also falsely represented that key GTF personnel had extensive experience with Wall Street's top financial firms. Thompson himself boasted false trading qualifications and misstated GTF's success as an investment company.
According to the SEC's complaint, Lewis solicited and obtained approximately $170,000 in investments from at least five investors and obtained $29,000 in commissions from the fraud. Goodluck, a J.P. Morgan Chase Bank employee in Brooklyn at the time, recruited at least two Chase customers to invest in GTF without disclosing those outside activities to Chase. Goodluck personally obtained approximately $78,000 of the investors' funds from GTF's Chase account and provided Thompson with cash from the same account to pay some of his personal expenses, including exotic trips for him and his girlfriend, private school tuition for his son, and meals at restaurants. By 2009, Thompson had dissipated all of the funds that investors had invested in GTF.
The SEC charged Thompson and GTF with violating the securities registration provisions of the Securities Act of 1933 and the antifraud provisions of the Securities Act and the Securities Exchange Act of 1934. Thompson also is alleged to have violated the antifraud provisions of the Investment Advisers Act of 1940. GTF is alleged to have violated the registration requirements of the Investment Company Act of 1940. Lewis is alleged to have violated the antifraud provisions of the Securities Act and the Exchange Act, and to have aided and abetted violations of the Advisers Act. Goodluck is alleged to have aided and abetted violations of the antifraud provisions of the Exchange Act and the Advisers Act. The Commission seeks to enjoin each defendant from future violations of these provisions along with monetary relief and certain other sanctions.
Ken C. Joseph, Lee Bickley, and Cynthia Matthews in the New York Regional Office conducted the investigation and will prosecute the SEC's case. The Commission thanks the District Attorney's Office for the County of New York for its assistance in this matter.
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For more information about this enforcement action, contact:
Associate Director, SEC's New York Regional Office
Ken C. Joseph
Assistant Director, SEC's New York Regional Office