U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23729/ January 27, 2017
Securities and Exchange Commission v. Herman Ronnie Young, Jr. d/b/a Race Cycler, No. 1:17-CV-00243-JMC (D.S.C. filed Jan. 26, 2017)
SEC Announces Fraud Charges Against Operator of Online Pyramid and Ponzi Scheme
The Securities and Exchange Commission today announced that Herman Ronnie Young, Jr. has agreed to admit wrongdoing to settle charges that he operated an Internet-based pyramid and Ponzi scheme.
According to the SEC's complaint, filed yesterday in the U.S. District Court for the District of South Carolina, thousands of individuals nationwide and overseas collectively invested over $1.3 million through Race Cycler's website from August 2014 until February 2015. Investors paid $230 to become "members" of Race Cycler and recruited other members in order to move up the pyramid and eventually earn reward points, which could be converted to cash. The reward payments to earlier investors were made from the funds received from later investors. According to the complaint, Young promoted Race Cycler as a legitimate enterprise selling e-books, but the products Race Cycler purported to sell were practically valueless and existed only to give the illusion of a legitimate enterprise. In February 2015, following discussions with the SEC's staff, Young voluntarily shut down Race Cycler.
Young agreed to the entry of a final judgment permanently enjoining him from future violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, a permanent conduct-based injunction, and an order requiring him to pay $342,510 of approximately $1.32 million in disgorgement and prejudgment interest based on his sworn statement of financial condition. The judgment does not impose a civil penalty based on Young's cooperation with the SEC. The settlement is subject to court approval.
The Commission acknowledges the assistance of the United States Attorney's Office for the District of South Carolina.