U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 19441 / October 24, 2005
Securities and Exchange Commission v. Donald Matthew Greth and Brenda B. Melton, Civil Action No. 05-5040 (D. NJ)
COMMISSION FILES EMERGENCY ACTION AGAINST DONALD MATTHEW GRETH AND BRENDA B. MELTON TO STOP ONGOING PONZI SCHEME
The Securities and Exchange Commission ("Commission") announced that on October 21, 2005, it filed an emergency civil action in the United States District Court for the District of New Jersey against defendants Donald Matthew Greth, of Lindenwold, New Jersey and Brenda B. Melton, of Upperville, Virginia, alleging that defendants are conducting a Ponzi scheme that is targeting employees of a working farm in Upperville, Virginia, and other investors. On October 21, 2005, pursuant to the Commission's request, the Honorable Jerome B. Simandle issued an order freezing the defendants' assets, temporarily enjoining them from violating the antifraud provisions of the federal securities laws, granting expedited discovery and preventing the alteration or destruction of documents. The Court set a hearing date of October 31 on the Commission's motion for a preliminary injunction.
The Commission's Complaint alleges that, since at least June 2003, and continuing through the present, Greth and Melton have been engaged in a fraudulent scheme to deceive investors in at least two states, using misrepresentations and omissions of material fact in connection with the offer and sale of shares in a fictitious "Christian" investment fund run by Greth. Greth pled guilty in 1991 and served 21 months in federal prison for orchestrating a Ponzi scheme in the late 1980's, and he was subsequently enjoined by the Commission.
The Complaint alleges that Greth uses DMG Investments and DMG Funds, fictitious entities, to market the scheme to potential investors. Among other things, the defendants are misrepresenting to investors that they are investing in a "Christian based mutual fund"; that they will receive returns of more than 18% monthly, or 629% annually; that investors can withdraw their money at any time without penalty; that Greth is paying the taxes for investors; and that Greth is an "advisor" and "mutual fund specialist." As of September 2005, at least 140 investors had invested with the defendants. The Complaint further alleges that, instead of investing investor funds as promised, the defendants are using the funds from new investors to pay prior investors and to enrich themselves.
The Complaint alleges that Greth and Melton violated 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 that Greth violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Complaint seeks a permanent injunction, disgorgement together with prejudgment interest, and civil penalties.