SEC Halts Sham Real Estate Investment Offering Fraud
Litigation Release No. 24316 / October 12, 2018
Securities and Exchange Commission v. Susan Werth, a.k.a. Susan Worth, Corporate Mystic, LLC, Commercial Exchange Solutions, Incorporated, and Exchange Solutions Company, No. 18-civ-8436-SVW (JPRx) (C.D. Cal. filed Oct. 1, 2018)
On October 1, 2018, the Securities and Exchange Commission filed an emergency action to halt an ongoing offering fraud perpetrated by Susan Werth, a.k.a. Susan Worth, and several companies she controlled - Corporate Mystic, LLC, Commercial Exchange Solutions, Inc., and Exchange Solutions Company.
According to the SEC's complaint, which was unsealed on October 10, 2018, Werth and her companies raised over $26 million, promising investors to use their money to fund short-term, high-interest rate loans in connection with tax-deferred real estate projects, when in fact they used those funds to make Ponzi payments to other investors, and to pay Werth's numerous personal expenses. The SEC's complaint alleges that Werth and her companies did not fund any of the promised real estate projects and instead misused investor funds. Werth used forged bank statements to fraudulently assure investors that her companies had assets sufficient to guarantee the payments to investors, and she also concealed her criminal history and previous lawsuits against her for fraud.
The complaint charges Werth, Corporate Mystic, LLC, Commercial Exchange Solutions, Incorporated, and Exchange Solutions Company with violating the antifraud provisions of Sections 17(a) of the Securities Act of 1933, Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder, as well as the securities registration provisions of Section 5 of the Securities Act of 1933. The SEC is seeking injunctions against future securities laws violations, disgorgement of the defendants' ill-gotten gains, and civil penalties.
On October 2, 2018, the SEC obtained a temporary restraining order which enjoins the defendants from continuing to violate the federal securities laws, imposes an asset freeze, orders an accounting, and prohibits the destruction of documents.
The investigation was conducted by M. Lance Jasper and Maria Rodriguez and supervised by Spencer Bendell. The litigation will be led by Donald Searles and Douglas Miller. The SEC acknowledges the assistance of the Federal Bureau of Investigation and the U.S. Attorney's Office for the Central District of California.