Napoli Bern Ripka, LLP Investigates Recent New York Affinity Fraud Scheme
NEW YORK May 26, 2010
Affinity fraud refers to investment scams that target members of identifiable groups, such as the elderly, religious, or ethnic groups. Perpetrators portray themselves as members of the group in order to gain trust and eventually solicit investments in fraudulent scheme. Ponzi schemes are often combined with affinity fraud.
Recently, the SEC filed charges against New York investment firm GTF Enterprises Inc., the firm’s manager Gedrey Thompson, and associates Sezzie Goodluck and Dean Lewis for defrauding investors.
This affinity fraud targeted Caribbean and African-Americans with little investment experience, by inducing them to invest funds with promises of guaranteed returns. From 2004 through 2009, GTF and Thompson conducted an affinity fraud and ponzi scheme, targeting unsophisticated investors from African-American and Caribbean communities in Brooklyn, New York.
Thompson and his associates scammed investors into investing over $800,000 in GTF brokerage accounts by promising lofty, but false, investment returns with guaranteed safety of principal. Instead of using investors’ money as promised, Thompson invested only $100,000 of customers’ funds in the GTF brokerage account. Thompson misappropriated hundreds of thousands of dollars for personal use. Many GTF investors lost their life savings.
Thompson lost all of the invested funds trading in options and failed to disclose these losses to current or prospective GTF investors. Even worse, Thompson misappropriated thousands of dollars for personal use. For example - trips for Thompson and his girlfriend, private school tuition for his son, and meals at restaurants.
In order to conceal and perpetuate the scheme, Thompson and GTF provided investors with fictitious quarterly account statements.
Thompson, Lewis, and GTF made multiple misrepresentations to customers, promising customers that their money would be invested in options, futures, commodities, or other securities. Thompson told investors that their investments were risk-free and guaranteed a pre-determined rate of return per quarter, between 4 and 20 %, regardless of how the GTF account performed in the market.
In communications with prospective investors, Thompson guaranteed the safety of an investment with GTF. Thompson told one customer even when the market was at its worst that her investment would be “150% guaranteed” and told another customer that Thompson could make that person a millionaire.
In a promotional brochure Thompson provided to prospective GTF investors, Thompson touted GTF as “miles ahead of other investment management companies” because it assumed all of the trading risk. Additionally, Thompson described GTF’s trading strategy as “risk-averse.” These representations were false.
The SEC complaint also charges GTF account manager Dean Lewis and assistant treasurer Sezzie Goodluck with making false or misleading representations to investors.
Napoli Bern & Ripka LLP represents victims that have suffered losses caused by affinity fraud targeting a variety of groups, including the fraudulent trading schemes of GTF, Thompson, and his associates.
Source: http://www.sec.gov/litigation/complaints/2010/comp-pr2010-87.pdf
