The Securities and Exchange Commission filed charges against a northern California investment advisor, alleging he operated a Ponzi scheme that took in more than $60 million from investors. John Geringer, 47, along with several entities he operated, was charged with violations of the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisors Act of 1940. The SEC is seeking disgorgement of all ill-gotten proceeds of the scheme, civil monetary penalties, and injunctive relief barring future violations.
Geringer operated the GLR Growth Fund, L.P. (the "Fund"), along with GLR Capital Management, LLC ("GLR Capital"), which acted as the Fund's general partner, and GLR Advisors, LLC ("GLR Advisors"), which acted as investment advisor to the Fund. Beginning no later than 2005, Geringer solicited individuals to invest in the Fund by claiming that the Fund consistently achieved annual returns during the time period of 2001 to 2011 ranging from 17% to 25%, including a return of 24% in 2008 when the S&P 500 lost 38.5%. However, the Fund itself did not even exist until 2003. Prospective investors were told that the Fund achieved these returns simply by investing in investments tied to major market indices, as well as technology and commodity-based investments. Investors were provided with false and misleading market materials that claimed that the Fund invested 75% of its assets in securities tied to major trading indexes, with no more than 25% of assets in public and private oil, gas, and technology companies. Additionally, Geringer supplied investors with falsified brokerage and tax records that purported to show short-term capital gains.
In reality, the Fund experienced trading losses every year from 2005 to 2009, including a 33% loss in 2008 and a 92% decline in 2009. Additionally, rather than invest in publicly traded securities, the Fund instead invested nearly $30 million, or half of the total funds raised from investors, in two private startup technology companies that were highly illiquid. By mid-2009, the Fund had stopped trading entirely after suffering massive losses. With no trading returns to pay to investors, Geringer instead used funds contributed by existing investors to create the false appearance that the Fund was profitable.
Geringer also included the representation on periodic account statements that the Fund was "MEMBER NASD AND SEC APPROVED". According to the SEC, neither of these claims were true, and the SEC does not 'approve' funds or investments in funds.
A copy of the SEC's complaint is here.