SEC Charges Promoters of "Green" Investments With Operating $30 Million Ponzi Scheme Based in Denver Area
FOR IMMEDIATE RELEASE
Washington, D.C., Nov. 16, 2009 — The Securities and Exchange Commission today charged four individuals and two companies involved in perpetrating a $30 million Ponzi scheme in which they persuaded more than 300 investors nationwide to participate in purported environmentally-friendly investment opportunities.
The SEC alleges that Wayde and Donna McKelvy, who were previously married and living in the Denver area, particularly targeted elderly investors or those approaching retirement age to finance such "green" initiatives of Pennsylvania-based Mantria Corporation as a supposed "carbon negative" housing community in rural Tennessee and a "biochar" charcoal substitute made from organic waste. The McKelvys promoted Mantria investment opportunities through their Denver-based company Speed of Wealth LLC. With the help of two other promoters who are Mantria executives — Troy Wragg and Amanda Knorr of Philadelphia — they convinced investors attending seminars or participating in Internet "webinars" to liquidate their traditional investments such as retirement plans and home equity to instead invest in Mantria.
The SEC alleges that the "green" representations were laced with bogus claims, and investors were falsely promised enormous returns on their investments ranging from 17 percent to "hundreds of percent" annually. In fact, Mantria's environmental initiatives have not generated any significant cash, and any returns paid to investors have been funded almost exclusively from other investors' contributions.
"These promoters fraudulently exaggerated Mantria's green initiatives and used high-pressure tactics to convince investors to chase the promise of lucrative returns," said Don Hoerl, Director of the SEC's Denver Regional Office. "In reality, the only green these promoters seemed interested in was investors' money."
The SEC's complaint, filed in federal court in Denver, charges Mantria and Speed of Wealth as well as the McKelvys, Wragg and Knorr, and seeks an emergency court order to freeze their assets. The SEC alleges that they overstated the scope and success of Mantria's operations in several ways to solicit investors. For instance, they claimed that Mantria was the world's leading manufacturer and distributor of biochar and had multiple facilities producing it at a rate of 25 tons per day. In fact, Mantria has never sold any biochar and has just one facility engaged in testing biochar for possible future commercial production. Furthermore, Mantria's only source of revenue has been from its resale of vacant lots for its purported residential communities in rural Tennessee, but those did not generate cash with which to pay investor returns because Mantria provided 100 percent financing for almost all of its vacant lot sales to buyers using other investors' funds.
According to the SEC's complaint, Speed of Wealth has frequently advertised its events through television, radio and print advertising as well as Internet marketing. At seminars and webinars sponsored by Speed of Wealth, Wayde McKelvy along with Wragg or Knorr generally conduct a two-part presentation in which they urge investors to liquidate all of their traditional investments, including individual retirement accounts, employer-sponsored 401(k) plans, mutual funds, stocks, bonds, and savings accounts. McKelvy also encourages investors to borrow as much as possible against home equity, parents' home equity, and business lines of credit. He then recommends that investors use all of their funds to invest in what he describes as the "consistent and safe" high-yield securities offered by Speed of Wealth and Mantria.
The SEC's complaint alleges that after Wragg or Knorr describe Mantria's purported operations and corresponding securities being offered, they market Speed of Wealth and Mantria securities with high-pressure tactics. They frequently offer short-term incentives and bonuses in various programs to induce investors to "pledge" their investments, or to induce those who have pledged to send in their money immediately. In seminars, webinars, and conference calls, Wayde McKelvy often calls upon past investors to provide "testimonials" about their receipt of high returns from past programs. McKelvy and Wragg also tout the safety and security of Mantria's securities based on collateral consisting of deeds of trust given to investors on Mantria's Tennessee rural land holdings. Wragg even tells potential investors that because of the valuable collateral, investors may make more money on their investments if Mantria defaults than if Mantria makes the promised payments. The promoters frequently allude to Mantria's imminent closing of sales worth hundreds of millions of dollars, initial public offerings of securities that are "sure to come" and "sure to be a very huge Wall Street hit", or upcoming investments by "Wall Street."
The SEC alleges that Mantria and Speed of Wealth used investor funds to pay returns to other investors in typical Ponzi scheme fashion. Mantria and Speed of Wealth also did not tell investors that they kept a significant amount of their funds to generously pay commissions of 12.5 percent to the McKelvys.
The SEC's complaint charges each of the defendants with violating the antifraud and offering registration provisions of the securities laws. The SEC also charged all of the defendants except for Mantria with violating broker-dealer registration requirements. The SEC seeks injunctions, disgorgement, and financial penalties from the defendants.
The Commission acknowledges the assistance of the Colorado Department of Regulatory Agencies, Division of Securities, with which the Commission has coordinated its investigation. The SEC's investigation is continuing.
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For more information about this enforcement action, contact:
Donald M. Hoerl — Director, SEC's Denver Regional Office — (303) 844-1060
Laura M. Metcalfe — Assistant Director, SEC's Denver Regional Office — (303) 844-1092