SEC Charges Investment Adviser with Stealing Millions from Investors to Perpetrate Ponzi Scheme

Litigation Release No. 24430 / March 20, 2019

Securities and Exchange Commission v. Carol Ann Pedersen, No. 19-cv-2069 (C.D. Cal. filed March 20, 2019)

The Securities and Exchange Commission today charged a Long Beach, Calif. investment adviser with stealing millions of dollars from investors to perpetrate a Ponzi scheme.

The SEC alleges that Carol Ann Pedersen, a former CPA and unregistered investment adviser, raised at least $29 million from 25 investors, falsely promising to invest their money in securities. Pedersen told prospective investors that she would place their money in "federally guaranteed" securities with returns typically greater thanĀ 8%. Pedersen also solicited investments in the C.A. Pedersen Client Investment Pool, a limited partnership managed by Pedersen that she claimed owned a large and diverse stock portfolio. According to the complaint, rather than make the promised investments, Pedersen used about $25.6 million to make Ponzi-style payments to investors, and the remaining funds to pay for personal expenses including car payments and home renovation costs. To conceal her fraudulent scheme, Pedersen provided investors with fabricated account statements that falsely represented that their money had been invested and was earning a return. Pedersen's scheme fell apart in 2017 when she began to experience chronic cash flow problems and investors sued her.

In a separate action, the U.S. Attorney's Office for the Central District of California today announced criminal charges arising from the same conduct.

The SEC's complaint, filed in federal district court in Los Angeles, California, charges Pedersen with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. Pedersen has agreed to the entry of a final judgment in which she consents to injunctive relief and to be liable for approximately $2.7 million in disgorgement and interest, which will be deemed satisfied by the anticipated entry of a restitution order against her in the criminal action. The final judgment also does not order a penalty against Pedersen in light of her anticipated guilty plea and conviction. The settlement is subject to court approval.

The SEC's investigation was conducted by Robert C. Stillwell and supervised by Finola H. Manvelian of the Los Angeles office. The SEC appreciates the assistance of the U.S. Attorney's Office for the Central District of California and the Federal Bureau of Investigation.