One of the first rules of investing for individual investors is to make sure you give your money to someone you trust. Boiler rooms are making a comeback, and unsolicited calls and emails from supposed investment brokers are classic signs of a fraudulent investment scam.
But, what if you hear about an investment opportunity from an acquaintance – a friend or professional advisor you have known for years? Is your relationship enough “due diligence” to make an informed investment decision? Unfortunately, maybe not.
Investors’ Money Used to Fund Ponzi Scheme and Personal Expenses
Former Philadelphia Eagles linebacker Merrill Robertson Jr. is facing charges from the Securities and Exchange Commission (SEC) in relation to an alleged $6 million investment fraud scam. With a partner, Sherman Vaughn Jr., Robertson formed a company called Cavalier Union Investments, LLC (“Cavalier”) which then solicited more than $10 million from Robertson’s former coaches and approximately 60 other investors. These investors included donors, alumni and employees of schools that Robertson had attended prior to his NFL career.
According to the SEC’s complaint, Robertson and Vaughn told investors that their money would be used to purchase promissory notes that offered “safety and security” along with a 10 to 20 percent return. In reality, however, Cavalier only invested a small portion of investors’ principal, and the invested funds all went into restaurants that failed just a short time later. Robertson and Vaughn allegedly misrepresented for years that the restaurants remained open, and they continued to solicit additional funds. The SEC’s complaint states that the money that did not get invested was used to, “pay back old investors and finance [Robertson’s and Vaughn’s] luxurious lifestyles.”
The complaint also alleges that Robertson and Vaughn:
- “[P]ortrayed themselves as experienced investment experts and Cavalier as a sophisticated company with various divisions, investment funds, and investment advisors.”
- Told investors that their money would be invested in, “a broad range of business ventures, such as restaurants, real estate, alternative energy, and assisted living facilities.”
- Assured that Cavalier’s investment portfolio was, “secured by tangible assets that yield higher returns than investments.”
Cavalier quickly became “functionally insolvent,” and when Robertson and Vaughn could not make existing investors’ interest payments, they solicited more funds from additional investors. In the end, they allegedly used more than $6 million of investors’ money to pay for “cars, family vacations, spa visits, luxury goods, educational expenses for family members, and a luxury suite at a football stadium.”
Sadly, the SEC’s complaint against Robertson, Vaughn and Cavalier is just one in a long line of cases of unsuspecting investors losing money to people they thought they could trust. It highlights the importance of not only doing your research before investing, but continuing to monitor your investments as well.
Zamansky LLC | Investment Fraud Attorneys Representing Clients Nationwide
Have you suffered fraudulent investment losses? If so, the investment fraud attorneys at Zamansky LLC can help. With offices on Wall Street in New York City, Zamansky LLC represents individual investors nationwide. To schedule a free and confidential consultation, call us (212) 742-1414 or request an appointment online today.