A Utah man was hit with civil fraud charges by the Securities and Exchange Commission, who alleged that he had duped investors out of more than $4 million in an elaborate Ponzi scheme. Steven B. Heinz, of Provo, Utah, was charged with multiple violations of federal securities laws in a complaint filed today in Utah federal court. The Commission is seeking disgorgement of all ill-gotten gains, as well as injunctive relief and civil monetary penalties.
Heinz worked as a registered representative at several registered broker-dealers from 1986 to 2012, including Northwestern Mutual and Ogilvie Security Advisors Corp. Beginning in January 2012, Heinz began soliciting current and former brokerage clients to provide "loans" to his company, S.B. Heinz & Associates, Inc ("S.B. Heinz"), telling prospective investors that he had been so successful investing his personal funds that he had decided to assist a select group of others. These investors, including church associates, family members, and friends, were told they could earn "tax-free" income by providing "loans" to S.B. Heinz, and that they could expect annual returns ranging from 6% to 120%. To convince investors that their funds would be safe, Heinz represented that he maintained ample cash reserves in the account to repay all investments at any time.
However, Heinz was not the fabled trader he represented himself as to investors. Rather, since January 2012, Heinz has incurred more than $1.5 million in day-trading losses sustained from trading high-risk futures contracts. Heinz misappropriated investor funds for a variety of purposes, including to make Ponzi-like payments of interest and principal redemptions to existing investors. Additionally, Heinz spent more than $1 million on personal expenses including trips to Mexico, cash withdrawals, and funding his adult children's online business opportunities. By June 2013, only $311,000 was left in Heinz's trading accounts.
The complaint noted that Heinz was believed to have made monthly sizeable cash payments to his wife, who was named as a relief defendant.
A copy of the complaint is here.