SEC Accuses Exec in $75 Million Ponzi

     CHICAGO (CN) – Canopy Financial’s chief technology officer help defraud investors of more than $75 million, using a fake independent auditor’s report and bogus financial documents, the SEC claims in Federal Court. The SEC claims Anthony Banas pocketed more than $975,000 in ill-gotten gains from Canopy’s 2009 stock offering. Another top Canopy executive faces criminal charges.

     The SEC claims that Banas, 32, of Chicago, forged bank documents using a client’s statement from Northern Trust Bank, to persuade Spectrum Equity Investors to buy into its “private placement offering for Canopy preferred securities.” Banas is one of Canopy’s three founders and sat on its board, but “never held any securities industry licenses,” according to the complaint.
     “The falsified statements showed that a Canopy bank account held millions in the account between January 2009 and June 2009. In reality, the account at Northern Trust was a Canopy client’s custodial account that held only $85,000 by June 2009,” according to the SEC. It adds that Banas did not tell Spectrum that Canopy had not been operating at a profit in 2009.
     The SEC claims that Banas initiated a fake “client reference” call between Spectrum and a Canopy employee, who posed as a representative from Blue Healthcare Bank, to lie about the number of accounts it had with Canopy, to further the facade. Banas also lied on Canopy’s website, claiming to be a graduate of Loyola University of, the SEC adds.
     The SEC claims that Banas knew that Canopy COO Jeremy Blackburn – who is facing criminal charges of taking more than $2 million of investors’ money for personal use – fabricated an independent auditor’s report, attributed it to KPMG, and submitted it to Spectrum.
     Banas and Blackburn “misappropriated a total of approximately $19 million from individual HSA/FSA clients between 2004 and the 2009 Canopy offering,” the SEC says.
     Canopy investors paid more than $75 million for shares of the company’s preferred stock after reviewing the falsified financial documents, the SEC says. Canopy then used some of the money to pay “approximately $40 million in redemptions to previously existing investors,” the SEC adds.
     Canopy’s scheme was exposed when the company’s attorney distributed the so-called auditor’s report to an acquaintance at KPMG, the SEC says. KPMG demanded that Canopy stop using the report and its name.
     Canopy was founded in 2004 by Blackburn, Banas and former CEO Vikram Kashyap to provide “a platform to assist clients with administering and managing their employees’ individual health savings and flexible spending accounts,” according to the SEC. The company filed for bankruptcy in late 2009.
     The SEC demands disgorgement and civil penalties.

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