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SEC Sues Pennsylvania Man Who Facilitated $100 Million Ponzi Scheme

The United States Securities and Exchange Commission ("SEC") initiated a civil enforcement action against a Pennsylvania man for his role in funneling at least $30 million in investor funds into a $100 million foreign currency Ponzi scheme.  Emanuel L. Sarris, and his company, Sarris Financial Group, Inc. ("Sarris Financial") were charged with multiple violations of federal securities laws in their solicitation of investors for the Kenzie Fund, which defrauded investors worldwide out of over $100 million.  The SEC is seeking injunctive relief, disgorgement of ill-gotten proceeds, and civil monetary penalties.  

According to the SEC, Sarris provided estate planning and insurance sales to investors through Sarris Financial.  By soliciting existing Sarris Financial clients and holding numerous seminars and "free dinners", Sarris convinced over 70 individuals to invest over $30 million with the Kenzie Funds, making a variety of misrepresentations designed to lend an air of legitimacy to the investment.  For instance, Sarris told investors that he was independent of the Kenzie Funds and that his advice was unbiased and objective.  Additionally, Sarris represented that he had performed due diligence on the Kenzie Funds, and that he had personally seen the Funds' trading and banking records.

However, each of these representations was false.  In reality, Sarris received hundreds of thousands of dollars in salary as an employee of the Kenzie Funds, and also was paid approximately $1.5 million in incentive fees based on the amount of assets under management attributable to Sarris.  Sarris also never saw any foreign currency trading records or communicated with Kenzie's bankers.  Instead, Sarris ignored numerous red flags about the safety and legitimacy of the Kenzie Funds, including that some clients often received different returns for the same time period, and that the telephone number for the Funds' outside auditor had been disconnected since 2006.  Additionally, on at least two occasions, Sarris proposed to Kenzie executives that investor redemption requests be funded by using investor funds. Nevertheless, Sarris continued to solicit new investors for the Kenzie Funds.

The SEC obtained an emergency restraining order and asset freeze against the Kenzie Funds in June 2010.  Shortly thereafter, the operator of the Kenzie Funds was ordered to pay $44 million in disgorgement, along with a $150,000 civil penalty.

A copy of the complaint is here.