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SEC Charges N.C. Resident, Biltmore Financial Group for Operating Multi-Million Dollar Ponzi Scheme


Washington, D.C., Nov. 12, 2008 — The Securities and Exchange Commission today charged North Carolina resident J.V. Huffman and his company, Biltmore Financial Group, Inc., with securities fraud for conducting a Ponzi scheme where more than $25 million was raised from investors and used primarily to fund Huffman's lavish lifestyle. The SEC also obtained a court order freezing the assets of Huffman and Biltmore, and appointing a temporary receiver.

The SEC's complaint alleges that Huffman offered and sold more than $25 million in investments to more than 500 individuals around the country. Initially, Huffman told investors that Biltmore operated like a mutual fund but, to assure investors after Sept. 11, 2001, that they were safe from market volatility, Huffman subsequently represented that Biltmore generated profits by pooling investor funds to buy and sell mortgages. The SEC's complaint alleges that Huffman's claims were wholly fraudulent, and he used investor funds for such luxurious personal purchases as an Aston Martin convertible and a $1 million recreational vehicle, renovations to his home including an extensive home theatre, and vacation and rental properties.

"In a tragic example of the way a fraudster operates a Ponzi scheme, Huffman deceived neighbors and members of his church and religious community, as well as strangers, to finance his extravagant way of life," said Katherine Addleman, Director of the SEC's Atlanta Regional Office. "Huffman lied to get investors' trust and then spent their invested funds on fancy cars and vacation homes."

According to the SEC's complaint, filed in federal district court for the Western District of North Carolina, Statesville Division, Huffman began his offering fraud more than 17 years ago by representing that Biltmore operated like a mutual fund. The complaint alleges that when Huffman changed his pitch after Sept. 11, 2001, and represented that Biltmore generated profits by buying and selling mortgages at a premium price, he began raising investor funds more rapidly. As alleged in the complaint, Huffman raised funds from more than 500 investors, many of whom were members of the Lutheran community around his North Carolina home.

According to the SEC's complaint, investors were promised profits at market rates which were guaranteed not to lose money and "insured and secured" by the FDIC, SIPC, and Thrivent Financial Services. For example, the SEC's complaint notes that Huffman used a "Biltmore Financial Group Company Dossier" reporting that the interest rate paid to investors had varied from 10.15 percent in 1991 to 16.54 percent in 2007, with no intervening year's rate below 8.02 percent. Further, as alleged in the complaint, an August 2008 letter to clients represented that Huffman's investment program would not be affected by the emerging subprime crises because he only purchased mortgages with a "with a good five to seven year history and a minimum equity position of 20 percent." The SEC's complaint alleges that each of the representations were false.

The SEC's complaint alleges that the scheme collapsed on November 7 when the North Carolina Secretary of State's Securities Division executed a search warrant to obtain records from Huffman and Biltmore. Huffman then confessed that he never invested the funds as represented to investors, used new investor funds to pay profits to earlier investors, and used funds for his extensive personal purchases.

The SEC's complaint charges Huffman and Biltmore with violating the antifraud and securities registration provisions of the federal securities laws. In its complaint, the SEC sought emergency relief for investors, including a temporary restraining order, injunction, asset freeze, appointment of a receiver to take control of and protect assets, and an order for expedited discovery. Huffman and Biltmore agreed to the entry of an order imposing that emergency relief without admitting or denying the SEC's allegations. The SEC's complaint also seeks disgorgement plus prejudgment interest, and financial penalties against Huffman and Biltmore.

The SEC appreciates the assistance of the North Carolina Secretary of State's Securities Division, which conducted a parallel investigation of this matter and has arrested Huffman for criminal violations of the North Carolina Securities Act.

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For more information, contact:

Katherine Addleman
Regional Director, SEC's Atlanta Regional Office

William Hicks
Regional Trial Counsel, SEC's Atlanta Regional Office



Modified: 11/12/2008