SEC Obtains Asset Freeze of North Carolina Couple Orchestrating $32.5 Million Investment Scheme
FOR IMMEDIATE RELEASE
Washington, D.C., Sept. 8, 2009 — The Securities and Exchange Commission today announced fraud charges and an asset freeze against the perpetrators of a Charlotte, N.C.-based investment scheme that bilked $32.5 million from approximately 500 investors by falsely promising extraordinarily high returns.
The SEC alleges that Sidney S. Hanson and his wife Charlotte M. Hanson solicited investors at church gatherings and in other face-to-face meetings, persuading them to cash out their retirement funds and invest in so-called private loan agreements that the Charlotte couple offered through a dozen companies they controlled (collectively, Queen Shoals Entities). Through their Web site and a widespread sales force of at least 45 "consultants," the Hansons falsely promised investors that the investment contracts they were offering would generate them yearly returns ranging from 8 to 30 percent, and that their funds would be safe in a diversified portfolio of treasury bills, precious metals, and foreign currency.
From the Queen Shoals Web site:
But the Hansons and the Queen Shoals Entities never invested in treasury bills and invested very little of the funds raised from investors as promised, according to the SEC's complaint. Instead, they spent the majority of investor funds in a number of very risky private investment opportunities, and also misappropriated the money to pay personal expenses, sales commissions to their consultants, and investors in prior unsuccessful business ventures operated by Sidney and Charlotte Hanson, age 62 and 61 respectively.
"As senior citizens themselves, the Hansons knew exactly how to appeal to other older investors, saying all the right things to convince victims to make all the wrong decisions with their retirement savings," said Cheryl J. Scarboro, Associate Director in the SEC's Division of Enforcement.
According to the SEC's complaint, filed in U.S. District Court for the Western District of North Carolina, the Hansons and their network of consultants offered and sold approximately $32.5 million in private loan agreements to investors from August 2006 to June 2009.
Chief United States District Judge Robert J. Conrad, Jr. granted the SEC's request for an asset freeze and other emergency relief for investors on Sept. 3, 2009.
The SEC's complaint charges the Hansons and the Queen Shoals Entities with violating the antifraud and registration provisions of the federal securities laws. The defendants have agreed to settle the SEC's charges, without admitting or denying the allegations, by agreeing to permanent injunctions with disgorgement and financial penalties to be determined by the court at a later date upon motion of the Commission. The defendants also consented to an asset freeze and an order expediting discovery and preventing the destruction or concealment of documents.
In related actions, the Commodity Futures Trading Commission (CFTC) also filed charges against the defendants, and the U.S. Attorney's Office for the Western District of North Carolina filed an information and plea agreement in which Sidney Hanson pleaded guilty to one count each of securities fraud, mail fraud, and promotion of money laundering. Pursuant to the plea agreement, he faces a minimum 12-year prison sentence.
The SEC appreciates the assistance of the U.S. Attorney's Office for the Western District of North Carolina, the CFTC, and the North Carolina Secretary of State Securities Division in this matter.
The SEC's investigation is ongoing.
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For more information about this enforcement action, contact:
Cheryl J. Scarboro
Associate Director, SEC Division of Enforcement