Tag: Prime bank fraud

Lawyers and Prime Bank Investments

scams

If someone approaches you about investing in a Prime Bank investment program, walk away. Do not give them your time or money. It’s a scam.

The Securities and Exchange Commission shut down another one of these scams. Unfortunately, the investors lost at least $1.2 million before the SEC could step in.

According to the complaint, attorney Allen Ross Smith leveraged his title and position as an attorney to convince investors. The scheme was orchestrated by Switzerland-based MALOM Group AG, a company named with an acronym for “Make A Lot Of Money,” through individuals in Zurich and Las Vegas. Smith acted as MALOM’s attorney as well as its escrow agent and “paymaster.”

The SEC previously charged Malom Group AG, its principals, and agents in SEC v. Malom Group AG, et al, 2:13-cv-2280 (D. Nev. Dec. 16, 2013) and SEC v. Erwin et al., 2:14-cv-623 (D. Nev. Apr. 23, 2014). The principals of MALOM, Martin U. Schläpfer and Hans-Jurg Lips, are incarcerated in Switzerland.

The facts of the case are a mess, with various promises of funds coming from many different sources. At one point there was the lure of H-series Brazilian Letras do Tesouro Nacional (“LTNs”) – bonds issued by the Brazilian government in 1972 that were purportedly worth in excess of $200 million.

It looks like Smith was scammed into using his attorney escrow account to funnel investor money into the scam and out to MALOM’s principals. According to the complaint, Smith was making easy money, taking 1% of the incoming funds, by acting as the paymaster.

But then he stepped further over the line when he began taking a more active role in selling MALOM’s securities. Lawyer gone bad.

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Paperwork Dotted with Legal-Sounding Gibberish

Whenever you hear about a “prime bank” investment opportunity, walk away. A prime bank opportunity generally is described by the sponsor as an international investing program involving complex financial instruments that are too technical and complicated for non-experts to understand. If it’s too technical for you to invest why would you? – Astronomical returns are promised in exchange for secrecy about this lucrative international banking platform.

The SEC’s case against Frank L. Pavlico and his firm, The Milan Group, was just another prime bank scheme. It caught my eye because the SEC also brought charges against a lawyer involved in the scheme, Brynee K. Baylor.

What kept my attention was this quote from Stephen L. Cohen, Associate Director of the SEC’s Division of Enforcement:

“Pavlico and Baylor produced paperwork dotted with legal-sounding gibberish designed to deceive investors into believing this is a highly-sophisticated investment opportunity.”

And in the complaint:

“These documents were legal-sounding gibberish dotted with meaningless legal and financial terms that were designed to deceive investors into believing they were participants in a legitimate investment.”

A complaint by one of the deceived investors (.pdf) lays out what the scheme was offering. if the investor would deposit $325,000 into Baylor’s trust account Milan would provide a leased instrument with a value of $10 million. This would then be monetized and the resulting funds would be used to acquire a larger instrument.

These are just allegations, nothing has been proven and the defendants have not settled the charges.

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