U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20974 / March 26, 2009
Securities and Exchange Commission v. Millennium Bank, et al., Civ. Action No. 7:09-cv-0050-O (United States District Court for the Northern District of Texas)
SEC Halts On-Going $68 Million Ponzi Scheme Involving Sale of Bogus High-Yield CDs Issued by Caribbean-Based Bank and Its Swiss Affiliate
On March 25, 2009, the Commission filed an emergency action in the United States District Court for the Northern District of Texas to halt an on-going $68 million Ponzi scheme involving the sale of bogus certificates of deposit ("CDs"). The Commission's complaint alleges that Defendants William J. Wise, 58, of Raleigh, North Carolina and the Caribbean, and Kristi M. Hoegel, 34, of Napa, California, orchestrated the scheme through companies they control, including co-defendants Millennium Bank of St. Vincent and the Grenadines, its Geneva, Switzerland-based parent, United Trust of Switzerland S.A., and its U.S.-based affiliates, UT of S, LLC and Millennium Financial Group. U.S. District Judge Reed O'Connor granted a temporary restraining order, asset freeze, and other emergency relief against Defendants, including the appointment of a receiver to take control of their assets.
The complaint alleges that from July 2004 to the present, Millennium Bank, acting through Wise, Kristi Hoegel, Jacqueline S. Hoegel, 52, of American Canyon, California, Brijesh Chopra, 41, residence unknown, and Philippe Angeloni, 63, of Raleigh, North Carolina, raised at least $68 million from over 375 investors. According to the Commission's complaint, the Defendants solicited the funds for purported investment in self-styled "CDs" which promised returns up to 321% higher than the national overnight average rates offered on traditional bank-issued CDs.
The solicitations by the Defendants, which were distributed on the bank's website, www.mlnbank.com, and in advertisements in luxury lifestyle magazines, were replete with extensive and fundamental misrepresentations about Millennium Bank and its CDs, according to the Commission's complaint. For example, Millennium Bank mass marketed its CDs as safe and secure with guaranteed rates of return. Millennium Bank also claimed to be "the benefactor of Swiss banking . . . as well as the vast global investment network that United Trust of Switzerland S.A. has built over the last 75 years." According to the complaint, however, these assurances were false, because neither Millennium Bank nor UT of S, LLC actually invested any of the money it received from investors. Moreover, United Trust of Switzerland S.A. is not a bank. In reality, investor funds were diverted to the Defendants and used for a variety of illegitimate purposes.
The complaint alleges that, in order to create the appearance of a legitimate offshore investment, Defendants instructed investors purchasing the so-called "CDs" to mail/Federal Express their checks to the offshore bank. Once received, the checks were packaged and mailed to UT of S, LLC's office in Napa, California, where they were electronically deposited by a remote deposit machine into a UT of S, LLC operating account. The account, which is held at a major U.S. financial institution, also received tens of millions of dollars in investor funds via wire transfer.
Furthermore, according to the complaint, bank records establish that a vast majority of the $68 million raised from investors was misappropriated by the Defendants, who enriched themselves and paid their personal expenses, while making small Ponzi payments to investors—satisfying investors' liquidation requests with recent deposits of new investors.
The complaint alleges that the Defendants violated the anti-fraud provisions of 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. The complaint also alleges that the Defendants violated the offering registration provisions of Sections 5(a) and 5(c) of the Securities Act. In addition to the emergency relief granted by the Court, the Commission seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil money penalties against the Defendants.
The Commission's complaint further alleges that the Defendants funneled some of the $68 million to relatives and other associated persons and entities: Lynn P. Wise, 52, of Raleigh, North Carolina, Daryl C. Hoegel, 54, of American Canyon, California, Ryan D. Hoegel, 29, of Lincoln, California, Laurie H. Walton, 46, of Raleigh, North Carolina, and four Las Vegas, Nevada based entities: United T of S, LLC, Sterling I.S., LLC, Matrix Administration, LLC, and Jasmine Administration. The Commission's complaint names them as relief defendants, and requests orders requiring them to disgorge any funds or benefits they received which are traceable to the Millennium Bank CD sales.