Securities Lawyers Gone Wild l Allen Ross Smith Charged

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On May 2, 2014, the Securities and Exchange Commission (“SEC”) charged Florida lawyer Allen Ross Smith with fraud in connection with his role in in an advance fee investment scam run by the Switzerland-based Malom Group AG. Malom was run by individuals in Zurich and Las Vegas.  Its name—an acronym that stood for “Make a Lot of Money”—accurately described its mission, which was to separate its victims from their cash.  Smith was their attorney, escrow agent and “paymaster.”

The SEC first charged Malom and some of the people behind it in December 2013, alleging that the company had raised $11 million from U.S. investors.  Malom claimed its clients could enjoy outrageous returns on the funds they entrusted to the group, using lies and forged documents to make their scheme seem legitimate.  The investors signed on for what the SEC described as “foreign trading programs that were nothing more than vehicles to steal money.”  Typically, high yield interest programs, also known as prime bank frauds, are classic Ponzi schemes.  The victims make an initial investment, and then are persuaded to pay additional fees.  If any protest loudly enough, and want out of the program, they’re paid off with money ponied up by the next group of marks.

The Malom principals then divided their ill-gotten gains among themselves.  Apparently they were convincing scammers; they managed to keep the con going from 2009 to 2013, offering unending excuses to investors who wondered why they had yet to see the promised returns.

The Malom gang also dealt in fraudulent Standby Letters of Credit (“SBLCs”) and fake Brazilian bonds called Letras do Tesouro (“LTNs”), once again convincing interested parties of the paper’s authenticity by giving them specious “documentation.”

On the same day, December 16, 2013, the Department of Justice (“DOJ”) indicted six members of the group.

The investigation had not ended.  On 28 April, the SEC charged Las Vegas resident James Lee Erwin and his company Joint Venture Solutions.  Erwin acted as an intermediary between prospective victims and Malom, and received a percentage of the funds raised.

Now Smith has been charged.  According to the SEC, he used his attorney escrow account to collect investor funds and distribute them.  In addition, he offered and sold unregistered securities by making several required certifications regarding Malom to investors as part of a securities offering that was intended to help New Hampshire-based USA Springs, Inc. emerge from bankruptcy.  As a result of that fraudulent offering, the federal bankruptcy court for the District of New Hampshire entered a $60 million judgment against Malom in 2012.

The SEC seeks permanent injunctions, disgorgement of ill-gotten gains with prejudgment interest, and civil penalties against Smith.

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, or [email protected] or visit www.securitieslawyer101.com.   This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. For more information about going public and the rules and regulations affecting the use of Rule 144, Form 8K, crowdfunding, FINRA Rule 6490Rule 506 private placement offerings and memorandums, Regulation A, Rule 504 offerings, SEC reporting requirements, SEC registration statements on Form S-1 IPO’s, OTC Pink Sheet listings, Form 10 OTCBB and OTC Markets disclosure requirements, DTC Chills, Global Locks, reverse mergers, public shells, direct public offerings and direct public offerings please contact Hamilton and Associates at (561) 416-8956 or [email protected]. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com