U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21198 / September 8, 2009
Securitites and Exchange Commission v. Sidney S. Hanson, Charlotte M. Hanson, Queen Shoals, LLC, Queen Shoals II, LLC, Queen Shoals Capital, LLC, Queen Shoals Fund, LLC, Queen Shoals Group, LLC, Queen Shoals Holdings, LLC, Dominion Growth Fund, LLC, Dynasty Growth Fund, LLC, Heritage Growth Fund, LLC, Secure Wealth Fund, LLC, Select Fund, LLC, Two Oaks Fund, LLC, Civil Action No. 3:09-CV-00336 (RJC) (W.D.N.C., Filed August 4, 2009)
SEC Freezes Funds of Multistate Investment Fraud Syndicate; Couple and Their Companies Reaped $32.5 Million in Three-Year Loan Scam
The United States Securities and Exchange Commission (Commission) announced today that on September 3, 2009, the United States District Court for the Western District of North Carolina entered an order freezing the proceeds of an allegedly fraudulent high-yield investment scheme run by defendants Sidney S. Hanson, Charlotte M. Hanson, of Charlotte, North Carolina, and the twelve entities they controlled. The defendants, who consented to the order as well as civil injunctions and other equitable relief, are charged with operating a scheme that sold approximately 500 investors in North Carolina and elsewhere throughout the United States $32.5 million in 'private loan agreements' from at least August 2006 to June 2009.
The Commission's complaint alleges that the defendants, Sidney S. Hanson and Charlotte M. Hanson, through a network of more than 45 salesmen, offered and sold the so-called "private loan agreements" to investors located throughout the country. Operating through the various limited liability companies, the Hansons told investors that the investment contracts would generate fixed yearly profits ranging from 8% to 30%, depending on the amount invested and length of the agreement. Investors were provided periodic interest payments and account statements reflecting supposedly successful results and increasing balances. The Hansons informed investors that they were able to earn fixed, above-average, returns because the funds they invested in the private loan agreements were placed in a diversified and safe portfolio of treasury bills, precious metals, and foreign currency. In actuality, they invested the majority of the investor funds in a number of very risky private investments and did not invest in any treasury bills. Investors also were not informed that their funds would be used to pay the Hansons and their extensive sales force, or to make interest payments to other investors including investors in prior unsuccessful investment schemes operated by the Hansons.
Without admitting or denying the allegations of the Commission's complaint, the defendants consented to the entry of judgments permanently enjoining them from violating Sections 17(a) and 5 of the Securities Act of 1933 ("Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, with monetary relief to be determined by the court at a later date upon motion of the Commission. The defendants have also consented to an asset freeze and order expediting discovery and preventing the destruction or concealment of documents.