CHICAGO (CN) – An unlicensed fund manager raised $3.7 million from more than 45 investors in four states and funneled the money to his personal bank accounts, the SEC claims in Federal Court.
The agency claims that Massachusetts resident Randy M. Cho, 38, convinced investors in 2001 to join an investment pool to buy shares of big-name companies that were about to go public.
Cho told investors that he was a “preferred client” and former employee of Goldman Sachs, the SEC claims, though he never worked or had an account there and wasn’t licensed to sell securities.
Cho initially promised investors that they would profit from the IPO of Centerpoint, but when the public offering didn’t happen, he convinced them to roll their funds into buying shares of AOL/Time Warner, another company he said was headed for an IPO. He followed the same pattern with other companies, including Rosetta Stone, Google and Facebook, the SEC claims.
Cho also asked investors for more money to pay off a bogus U.S. tax liability, according to the lawsuit.
“In reality, there was no tax liability,” the SEC claims.
Instead, Cho siphoned the money into personal accounts at Bank of America and spent it on himself, his family, personal trading and to keep the Ponzi scheme going, the SEC claims.
It says Cho never bought any shares on behalf of the purported investment pool and did not have a professional license to sell securities.
The agency seeks civil penalties and disgorgement for alleged securities violations.
On Wednesday, Judge James Holderman granted the SEC’s request to freeze Cho’s assets.