U.S. securities regulators say they are taking emergency enforcement action to halt an alleged international pyramid scheme.
The U.S. Securities and Exchange Commission (SEC) announced Wednesday it has secured a federal court order freezing the accounts of a company known as Mutual Wealth, which it says has been carrying out a classic pyramid scheme in the guise of offering investments in a high-frequency trading strategy.
The SEC alleges that Mutual Wealth has been exploiting investors through social media sites such as Facebook and Twitter, promising extraordinary returns to investors, and encouraging them to recruit new investors to the scheme. However, according to the SEC’s complaint filed in U.S. District Court for the Central District of California, the company does not trade on behalf of investors. Instead, it says that it “merely diverts investor money to offshore bank accounts held by shell companies.”
The SEC says that the firm operates through entities in Panama and the UK and that it also uses offshore bank accounts in Cyprus and Latvia to divert money from investors.
The regulator’s complaint charges Mutual Wealth with various violations of U.S. securities laws. The allegations have not been proven.
In the meantime, a U.S. court has ordered its website be taken down and freezing its assets.
The SEC says its investigation is continuing, and has been assisted by various agencies, including the Ontario Securities Commission (OSC).
“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald Hodgkins, an associate director in the SEC’s Division of Enforcement. “Fortunately we were able to quickly trace the fraud overseas and obtain a court order requiring Mutual Wealth to shut down its website before the scheme gains more momentum.”