DENVER (CN) - Colorado investment manager Brian G. Elrod defrauded clients of $2 million in a promissory note scheme and his buddy, attorney Nova Dean Pack, referred nine of his 12 victims to him for a fee, the SEC claims in court.
The SEC sued Elrod, 54, of Buffalo Creek, Colo., and Pack, 64, of Highland, Calif., in Federal Court.
Elrod sold more than $2 million in bogus "guaranteed" high-yield promissory notes through his company, CFS Holding Co., the SEC says in the lawsuit.
He failed to repay any of the principal, stopped paying interest after 5 months, and gave most of the money to himself, to "his wife, children, and relatives, to pay undisclosed commissions to Pack for referring investors and ... to pay for Elrod's miscellaneous personal expenses, including clothing, food, flowers, and jewelry," according to the SEC.
As for his co-defendant, the SEC says: "Although Pack, Elrod's close friend, referred nine of the twelve investors in the CFS note offering to Elrod for a commission and otherwise participated in the offering, Pack has never been registered with the Commission as a broker or dealer, and has never been an associated person of a registered broker or dealer."
They promised 12 percent to 24 percent annual returns and sold $2,015,000 of the promissory notes, the SEC says in the complaint.
It seeks disgorgement, penalties and an injunction.
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