SEC v. Douglas F. Vaughan, The Vaughan Company, Realtors, Inc., and Vaughan Capital, LLC, United States District Court for the District of New Mexico, Civil Action No. 1:10-cv-00263-MCA-WPL

Realtor charged in investment ponzi scheme

For thouse of you with losses in real esate investmetns it may be of interest to note the SEC is taking an interest.

The Securities and Exchange Commission yesterday filed fraud charges against a prominent New Mexico realtor and obtained an emergency court order to halt his $80 million Ponzi scheme.

According to the SEC's complaint, Vaughan defrauded approximately 600 investors, promising them high, fixed interest payments ranging from 10 to 25 percent over one to three years. He misrepresented that the aggregate principal on the Vaughan Company notes would not exceed a certain limit. Vaughan falsely claimed that the notes were "secured" by certain real estate and his personal wealth, and that Vaughan Company used investor funds to generate profits well in excess of its obligations on the notes.

The SEC's complaint alleges that Vaughan's failing business accumulated losses totaling more than $61 million, and the $80 million in principal owed to investors is 20 times the claimed equity in the properties that were to secure the notes. The SEC also alleges that Vaughan's net worth, which was supposed to provide protection to investors, is negative in value. In direct violation of promises made, Vaughan transferred almost all of the money he raised from Vaughan Capital investors to Vaughan Company's operating account. He then used those funds to cover Vaughan Company's obligations to promissory note holders and its ordinary business costs.

The SEC's complaint charges the defendants with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. Vaughan and Vaughan Company are also charged with violations of Section 15(a)(1) of the Exchange Act.

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Published In: Administrative Agency Updates, Consumer Protection Updates, Securities Updates

Reference Info:Federal, 10th Circuit | United States

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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