U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23106 / October 8, 2014
Securities and Exchange Commission v. Nationwide Automated Systems, Inc. et al., Civil Action No. 14-Civ-07249 (SJO) (FFMx) (C.D. Cal., filed September 17, 2014)
SEC Shuts Down $123 Million Atm Ponzi Scheme in California
The Securities and Exchange Commission today announced charges against the perpetrators behind a California-based Ponzi scheme in which investors were told their money would be used to operate automated teller machines (ATMs) in popular public places and they would earn a significant share of the profits.
In a case unsealed yesterday in federal court in Los Angeles, the SEC has obtained an emergency court order to freeze the assets of Nationwide Automated Systems (NAS), located in the L.A. suburb of Calabasas, Calif. The order also appointed a temporary receiver over NAS’s assets and froze the assets of the company’s owner Joel Barry Gillis and fellow officer Edward Wishner.
The SEC alleges that NAS raised more than $123 million in the past 18 months by telling investors they could purchase ATMs from NAS and then lease them back in return for “rent” of 50 cents per ATM transaction. Investors were guaranteed an investment return of at least 20 percent per year in these sale-and-leaseback agreements. However, the vast majority of NAS’s revenue is from new investor funds, and this money is being used to pay the promised returns owed to earlier investors. NAS does not actually own most of the ATMs it claims to operate, a fact unknown to investors who were contractually forbidden in their agreements from contacting the locations where their ATMs were supposedly located.
According to the SEC’s complaint filed under seal on September 17, NAS, Gillis, and Wishner convinced investors to buy an ATM by paying a flat amount – typically $12,000 but in some cases $19,800. They have claimed to operate some 31,000 ATMs in high-traffic retail locations like hotels, casinos, and convenience stores largely in the Midwest. However, reports from the company’s third-party ATM servicers only identify approximately 235 ATMs currently serviced for NAS.
The SEC’s complaint charges NAS, Gillis, and Wishner with violating Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) as well as Sections 17(a)(1) and (3) of the Securities Act of 1933. NAS and Gillis also are charged with violations of Rule 10b-5(b) of the Exchange Act and Sections 5(a), 5(c) and 17(a)(2) of the Securities Act.
The SEC’s investigation was conducted by Peter Del Greco, Sara Kalin, Roger Boudreau, and Marc Blau in the Los Angeles office. The SEC’s litigation is being led by John Berry and Gary Leung.