SEC Obtains Emergency Order to Prevent Anthony Buzaneli from Leaving U.S.
On August 26, 2016, Judge Susan Richard Nelson of the District of Minnesota issued an order requiring Anthony Buzaneli to surrender his passports and prohibiting him from leaving the United States until further order of the Court. The order also freezes his assets, requires Buzaneli to provide an accounting, and requires Buzaneli to repatriate all of his assets to the United States.
The Court issued this order as a result of papers filed under seal by the Securities and Exchange Commission (“SEC”) seeking emergency relief against Buzaneli and naming him as an additional defendant in the SEC’s previously filed action against Providence Financial Investments, Inc. (“Providence Financial”), Providence Fixed Income Fund, LLC (“Providence Fund”) and others. The order and the SEC’s papers were unsealed by the court on August 30, 2016.
In the Amended Complaint, the SEC alleges that Buzaneli engaged in a scheme that defrauded investors in Providence Financial and the Providence Fund. The Amended Complaint also alleges that Buzaneli is liable for the violations of Providence Financial and the Providence Fund as a control person for those entities and that he is liable for aiding and abetting violations committed by Providence Financial and the Providence Fund. The original complaint was filed on June 7, 2016.
The SEC’s Amended Complaint alleges that:
- Providence Financial and Providence Fund raised more than $64 million from over 400 investors throughout the United States through the unregistered sale of promissory notes that pay annual returns generally ranging from 12% to 13%.
- Providence Financial and Providence Fund represented to investors that their investment proceeds would be used to fund the “factoring” of accounts receivable in Brazil. Contrary to these representations, the complaint alleges that Providence Financial and Providence Fund spent, at best, less than 68% of their investors’ money to finance Brazil factoring transactions, and both companies have been unable to account for how they spent the remaining investor proceeds.
- Uses of investor funds that were not disclosed to investors included the payment of 6% annual commissions to unregistered brokers for selling the promissory notes as well as the payment of millions of dollars to Providence Financial and Providence Fund insiders.
- In addition to misrepresenting to investors how they would use investor funds, Providence Financial and Providence Fund concealed from investors that the companies face serious financial difficulties.
- Both companies hold very little cash or liquid assets, while the amount of money owed to investors appears to dwarf the value of any Brazilian receivables investments held by them. Compounding these problems is a highly unfavorable foreign exchange rate which hinders the repatriation of Brazilian assets to repay U.S investors.
- As a result, the only way Providence Financial and Providence Fund are repaying their current investors is through the proceeds of new investments.
The SEC’s Amended Complaint alleges that Providence Financial and Providence Fund violated Sections 5(a), 5(c), and 17(a)(2) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5(b) thereunder; that Jarrell and Churchfield violated Sections 5(a) and 5(c) of the Securities Act and Section 15(a)(1) of the Exchange Act; and that Jarrell violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The Amended Complaint adds Buzaneli as an additional defendant and alleges that he violated Section 17(a)(1) and (3) of the Securities Act of 1933 (“Securities Act”) and Section 10(b) of the Exchange Act and Rule 10b-5(a) and (c) thereunder, that he is liable as a control person of Providence Financial and the Providence Fund under Section 20(a) of the Exchange Act for their violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder; and that he aided and abetted Providence Financial’s and the Providence Fund’s violations of Sections 5(a), 5(c), and 17(a)(2) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.
The SEC’s investigation in this matter is continuing.
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, by email at [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. Please note that the prior results discussed herein do not guarantee similar outcomes.
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