A California man and woman were arrested by authorities on charges that they masterminded a $21 million Ponzi scheme that pitched large returns in exchange for financing movie productions. Michelle Kenen Seward, 42, and Dror Soref, 75, were arrested by authorities with the California Department of Insurance last week. According to arrest records, Soref is being held on $2.7 million bail pending a September 28th court appearance.
Soref is an award-winning Hollywood filmmaker who once directed videos for comedian Weird Al Yankovic. Seward was previously licensed to sell insurance, which she sold through her entities Protege Financial and Insurance Services Inc. ("Protege") and Saxe-Coburg Insurance Solutions LLC ("Saxe-Corburg"). According to authorities, Seward solicited clients and potential investors - most of whom were elderly retirees - with the promise of outsized annual returns purportedly realized from the financing of movies produced by Soref. This included urging clients and potential investors to surrender annuities and other savings, as well as obtain home equity loans, in order to fund the investments. Potential investors were told their investment was safe and guaranteed and that it “was not a Ponzi scheme.”
Beginning in 2007, investors were solicited to finance production of the film "Not Forgotten," for which they were promised annual returns ranging from 10% to 18%. However, "Not Forgotten" did not attain the success Soref envisioned, and ultimately netted approximately $50,000 from the box office. Yet, despite the film's meager returns, Soref and Seward continued to solicit investors for a company they co-founded named Windsor Pictures, LLC ("Windsor"). While those making investments in Windsor were told that their funds would be used to finance future productions, authorities allege that those funds were instead diverted to pay the returns previously promised to "Not Forgotten" investors - a classic hallmark of a Ponzi scheme. Ultimately, authorities estimate that at least 140 victims invested over $21 million with Soref and Steward.
The California Commissioner of Business Oversight previously brought civil charges in 2012 against Soref, Steward, and their entities. Following those defendants failure to answer or defend the allegations, a default judgment was entered in 2014 ordering the defendants to pay $23 million in restitution and $15 million in civil penalties.
Perhaps surprisingly, this is not the first alleged Ponzi scheme centered around a filmmaking or production venture. For example, Georgia authorities arrested several individuals in 2011 on charges that their animation studio was a $2.1 million Ponzi scheme. More recently, a California man was sentenced to a 27-year prison term after being convicted of running a $11 million Ponzi scheme that promised exorbitant returns to investors from the production of independent movies.