SEC Issues Charges in $20 Million Boiler Room Scam Targeting Elderly Investors
In a lawsuit filed in the United States District Court for the Southern District of Florida, the Securities and Exchange Commission (SEC) has accused two men of orchestrating an investment fraud scam that bilked at least 600 individual investors out of approximately $20 million.
According to the SEC’s complaint, Craig V. Sizer and Miguel Mesa offered fraudulent investments in two companies, Sanomedics, Inc. and Fun Cool Free, Inc., using boiler rooms to pitch penny stocks to potential investors. The SEC alleges that the two men targeted elderly and unsophisticated investors, though others were allegedly defrauded in the scam as well. The SEC is asking the court to impose penalties, disgorge the profits from the scam, and bar Sizer and Mesa from future involvement in penny stock offerings and violations of federal securities laws.
An Unregistered Broker and “Materially Misleading” High-Pressure Sales
The specific allegations in the SEC’s complaint are as varied as they are severe. According to the court filing dated September 26, 2016, the SEC has charged Sizer and Mesa with:
- Operating boiler rooms in South Florida and Southern California where salespeople were given “materially misleading statements regarding [Sizer and Mesa’s] use of investor proceeds.”
- Using these boiler rooms to “fraudulently convince investors to purchase shares of” Sanomedics, Inc. and Fun Cool Free, Inc.
- Concealing the existence of the boiler rooms by misrepresenting that sales agents were employees of Sanomedics, Inc. and Fun Cool Free, Inc.
- Acting as an unregistered broker in violation of federal securities laws, and aiding and abetting unregistered brokerage operations.
Rather than investing investors’ funds in the two companies, the SEC asserts that Sizer and Mesa misappropriated approximately 90 percent of the funds for their personal use and to pay 15 to 20 percent commissions to the boiler room sales agents. Sizer is accused of using at least $3 million of investors’ funds to pay for personal “credit cards, residential renovations, luxury automobiles, and mortgage payments.” Investors were told that their investments would be used for research, development and acquisition of an additional company.
FINRA Warns of Reemergence of Boiler Room Scams
While reports of boiler room scams have waned in recent years, the Financial Industry Regulatory Authority (FINRA) recently issued a warning to investors that boiler rooms may be making a comeback. This case involves many of the hallmarks of a boiler room scam, including:
- Cold calling with high-pressure sales tactics
- “Discount” purchasing opportunities
- Offering of penny stocks
- Operation by an unregistered broker
- Promises significant returns
- Targeting elderly and unsophisticated investors
Individuals who receive unsolicited calls offering investment “opportunities” should be extremely wary of giving money to someone they do not know over the phone. Many boiler room operators are experts at soliciting money from unsuspecting victims, and if you lost money in a boiler room scam it is imperative that you act quickly to recover your losses.
Contact an Investment Fraud Attorney at Zamansky LLC
If you lost money in a boiler room scam, the attorneys at Zamansky LLC may be able to help you recover your losses. Our attorneys have decades of experience representing aggrieved investors, and we have recovered millions in compensation for our clients’ losses. To get started with a free, confidential consultation, call (212) 742-1414 or get in touch online today.