SEC Charges Indianapolis-Area Resident for Offering Fraud
Litigation Release No. 25063 / April 1, 2021
Securities and Exchange Commission v. George S. Blankenbaker, et al., No. 0:21-cv-790 (S.D. Ind. filed March 31, 2021)
The Securities and Exchange Commission today announced partially settled charges against George S. Blankenbaker of Westfield, Indiana in connection with fraudulent and unregistered securities offerings that raised over $11 million from more than 100 investors, many of whom were elderly.
According to the SEC's complaint, between August 2016 and May 2019, Blankenbaker and his companies, StarGrower Commercial Bridge Loan Fund 1 LLC, StarGrower Asset Management LLC, and Blankenbaker Investments Fund 17 LLC, raised more than $11 million from at least 109 investors through the fraudulent offer and sale of securities. The complaint alleges, among other things, that Blankenbaker and his companies falsely told investors that their money would be used to make short-term loans to food exporters in Asia, and that the investments were secured by shipping containers holding the food products. In fact, the complaint alleges, Blankenbaker misused at least $8.1 million of their money, including by directing at least $4 million to hemp companies, using at least $965,000 in new investor funds to make Ponzi-style payments to prior investors, and misappropriating at least $1.7 million in investor funds for his own personal benefit. According to the complaint, as result of Blankenbaker's fraud, investors lost at least $8.1 million.
The complaint, filed in the U.S. District Court for the Southern District of Indiana, charges Blankenbaker and his companies with violations of the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and also charges Blankenbaker, StarGrower Commercial, and StarGrower Asset with violations of the registration provisions of Section 5 of the Securities Act. Blankenbaker has consented to the entry of a judgment permanently enjoining him from violating the charged provisions, imposing an officer-and-director bar, and ordering him to pay disgorgement, prejudgment interest, and a civil penalty in amounts to be determined by the Court at a later date. Blankenbaker's companies have consented to the entry of a judgment imposing a permanent injunction and ordering the payment of disgorgement and prejudgment interest totaling $5,196,641 on a joint-and-several basis. The settlements are subject to court approval. Blankenbaker has also consented to an administrative proceeding barring him from the securities industry.
In a parallel action concerning the same conduct, the U.S. Attorney's Office for the Southern District of Indiana today filed criminal charges against Blankenbaker.
The SEC's investigation, which is continuing, is being conducted by James G. O'Keefe and Trevor W. Schumacher, supervised by Steven L. Klawans of the Chicago Regional Office. The litigation is being led by Benjamin J. Hanauer. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of Indiana, the Internal Revenue Service - Criminal Investigation, and the U.S. Postal Inspection Service.