MIAMI (CN) – The SEC sued two Fort Lauderdale-area men whom it claims fed more suckers to attorney Scott Rothstein’s Ponzi scheme than anyone else: $157 million worth.
The SEC sued George G. Levin, 71, of Fort Lauderdale, and Frank J. Preve, 68, of Plantation, in Federal Court.
Levin “was the managing member of several entities involved in investments with Rothstein,” and Preve “managed the day-to-day operations of Levin’s investments in Rothstein’s Ponzi scheme,” the SEC says in its complaint.
Rothstein, 49, is serving 50 years in federal prison. He was disbarred in 2009.
“From at least July 2008 to October 2009, George Levin and Frank Preve defrauded investors in raising funds to purchase purported legal settlements from now-convicted Ponzi schemer Scott Rothstein,” the complaint states. “Rothstein perpetrated a massive Ponzi scheme through the sale of fake discounted settlements utilizing his law firm Rothstein, Rosenfeld and Adler, PA (‘RRA’). Levin and Preve sold promissory notes and created a feeder fund to funnel investor capital to Rothstein, ultimately becoming his largest source of capital. With their fate tied to Rothstein, Levin and Preve’s settlement purchasing business collapsed along with the Ponzi scheme in October 2009.
“Levin and Preve first raised money to purchase Rothstein settlements by offering investors promissory notes issued by Levin’s company, Banyon 1030-32, LLC. In 2009, they formed a private investment fund called Banyon Income Fund, LP that invested exclusively in Rothstein’s settlements, and for which Banyon 1030-32 served as the general partner. Levin controlled them both and Preve operated them. Each profited from the amount which the settlement discounts they obtained from Rothstein exceeded the rate of return promised to investors.
“In soliciting funds to invest in Rothstein’s settlements, Levin and Preve distributed the offering materials to investors for the Banyon 1030-32 promissory notes and Banyon Income Fund. The materials for both contained material misrepresentations and omissions. Levin and Preve drafted or participated in the drafting of the offering materials for both entities, and Levin had ultimate authority over their content. Among other things, these offering materials represented to investors that prior to any settlement purchase, Banyon 1030-32 would obtain certain documentation regarding the settlements to ensure the safety of the investments. Levin and Preve, however, knew or were reckless in not knowing that Banyon 1030-32 often purchased settlements from Rothstein without obtaining any documentation whatsoever.
“Furthermore, Banyon Income Fund’s private placement memorandum (‘PPM’) misrepresented that the fund would be a continuation of a successful business strategy pursued by Banyon 1030-32 during the prior 2½ years. The PPM stated that Banyon 1030-32 had purchased more than $1 billion in Rothstein settlements, had already collected half of that amount, and was due more than $550 million in receivables from previously purchased settlements.
“However, Levin and Preve failed to disclose that by the time the Banyon Income und offering began in May 2009, Rothstein had already ceased making payments on a majority of the settlements Levin and his entities had purchased. They also failed to inform investors that Levin’s ability to recover his prior investments from Rothstein was contingent on his ability to raise at least $100 million of additional funding to purchase more settlements from Rothstein.”
The SEC seeks disgorgement, injunctions and penalties.