SEC Halts $15 Million Farm Loan Ponzi Scheme
The Securities and Exchange Commission filed civil fraud charges against an Indianapolis securities firm and accused it of operating a Ponzi scheme that raised more than $15 million under the guise of making short-term operating loans to farmers. Veros Partners, along with its President, Matthew D. Haab, associates Jeffrey B. Risinger and Tobin J. Senefeld, and several related companies, were charged with violations of federal securities laws in an emergency action filed in the Southern District of Indiana. The Commission has obtained an asset freeze and temporary restraining order, and is seeking disgorgement of ill-gotten gains, civil monetary penalties, and injunctive relief.
Haab managed Veros's investment advisory business, in which he personally managed the accounts of nearly 200 Veros clients. Following the financial crisis, Haab began looking for private investment opportunities for client investments, and was approached by Defendant Senenfeld in 2009 regarding a farm loan offering. Over the next few years, and with the help of Risinger, Haab created a number of these investment opportunities to offer to Veros clients. Potential investors were told that their funds would be used to make short-term operating loans to farmers to be used for the upcoming growing seasons, and that the farmers would repay the loans over the following year as they sold their crops or collected crop insurance payments. The promised rates of return ranged from 12% to 13.5%.
After several 2012 offerings failed to return the amount required to pay back investors, Haab used several million dollars raised during a 2013 offering to repay investors from the 2012 offerings. Further, while Haab raised nearly $10 million from investors during the 2013 offerings, he is accused of misstating the true amount of funds loaned to various farms during the 2013 crop season. The Commission also accused him of failing to disclose the true nature and amount of fees paid to Risinger and Senefeld for their roles in facilitating the loans. Haab is accused of encouraging investors to roll-over their balances upon maturity into new loans due to the fact that Haab lacked sufficient funds to repay investors.
In early 2014, Haab raised nearly $4 million from clients for a new 2014 offering. Combined with the millions of dollars in investments that were rolled over from earlier offerings, clients of the 2014 offering are collectively owed roughly $9 million when the offering comes due on April 30, 2015. The Commission alleges that insufficient funds exist to fully repay investors in the 2014 offerings, and further alleges that funds raised in the 2014 offering were used to pay existing investors in the 2013 offerings in Ponzi-like fashion. According to the Commission, Haab is currently facing a shortfall of approximately $7 million, and has acknowledged that investors in the 2014 offering are unlikely to be made whole upon maturity of the offering.
The Commission's complaint is below: