SECURITIES AND EXCHANGE COMMISSION
Litigation Release No 16257 / August 20, 1999
SEC STOPS $17 MILLION ON-GOING PONZI SCHEME
SECURITIES AND EXCHANGE COMMISSION V. SEBASTIAN INTERNATIONAL ENTERPRISES, INC., FERDINAND BEN SEBASTIAN, III, AND JAN L. SEBASTIAN, Case No. 99-1053-CIV-ORL-18-A (M.D. Fla.)
The Securities and Exchange Commission (SEC) announced that on August 19, 1999 it obtained emergency relief halting a Ponzi scheme conducted by a company and a husband and wife team operating out of the Orlando, Florida area. At the SEC's request, the Honorable G. Kendall Sharp of the United States District Court for the Middle District of Florida entered an order temporarily halting the on-going fraudulent sale of unregistered securities by Sebastian International Enterprises, Inc. (SIE), Ferdinand Ben Sebastian, III and Jan L. Sebastian (collectively, the Sebastians) and granting other immediate relief.
According to the SEC's complaint, filed on August 19, 1999, since at least June 1997, SIE has raised at least $17.7 million in connection with the fraudulent sale of the unregistered securities to over 400 investors nationwide. The SEC's complaint also alleges that about 31.5% of the funds came from many of the victims' retirement savings. Among other things, the SEC alleges that the Sebastians used investor funds to pay the personal expenses of their lavish lifestyle.
The SEC's complaint alleges that SIE, which purports to use 100% of investor funds from the sale of high interest promissory notes to create and produce a children's television program, Real Life 101, violated the antifraud provisions of the federal securities laws by making material misrepresentations and omissions. Among other things, SIE misrepresented that investors' funds would be used for SIE's business. According to the SEC's complaint, however, the Sebastians used a series of transfers to obtain possession of at least about $3 million of investor funds. The SEC alleges that the Sebastians then used those funds to purchase a home, travel to London, Paris, and Miami Beach (often by private jet charter), to pay for luxury cruises, to purchase firearms, and to purchase stocks and mutual funds. In addition, the SEC alleges that SIE and the Sebastians illegally used investor funds to make Ponzi-type payments to other investors and to pay commissions to SIE's marketing firms and sales agents.
The SEC's complaint also names S.I.E. Holdings, Inc., Sebastian International Entertainment, Inc., Grand Oasis, Inc. and 3dGolfer, Inc. as Relief Defendants. The SEC alleges that the Relief Defendants received investor funds to which investors are entitled.
Upon the SEC's motion, the Court also appointed Lynne Cole, Esq., of Tampa, Florida, as Receiver of SIE and its assets. The Receiver is responsible for marshaling and safeguarding all of SIE's assets.
In addition to the asset freeze and other relief, the temporary restraining order restrains SIE and the Sebastians from violating Sections 5(a), 5(c) and 17(a) of the Securities Act, 15 U.S.C. §§ 77e(a), 77e(c) and 77q and Section 10(b) of the Exchange Act, 15 U.S.C. §§ 78j(b) and Rule 10b-5, 17 C.F.R. 240.10b-5, promulgated thereunder.
The SEC acknowledges the assistance of the Wisconsin Division of Securities, the Pennsylvania Securities Commission, the Alabama Securities Commission, and the Texas Securities Commission in investigating this matter.