SEC Says Calif. Investment Advisor Ran Ponzi Scheme

Jun 4 2012 | 1:41pm ET

The Securities and Exchange Commission has charged an investment adviser in Scotts Valley, Calif., with running a $60 million Ponzi scheme.

The industry watchdog says John A. Geringer, who managed the Scotts Valley, Calif.-based GLR Growth Fund, defrauding investors by “touting imaginary trading profits instead of reporting the actual trading losses he incurred.”

The SEC alleges Geringer used “false and misleading marketing materials” (some of which made references to the 25% returns generated in 2001 and 2002 by the fund—which was established in 2003) to convince investors the fund was generating double-digit annual returns placing 75% of its assets in investments tied to major stock indices.

In reality, according to the SEC’s allegations, Geringer’s trading generated consistent losses and he eventually gave it up all together, masking his fraud by paying millions of dollars in ‘returns’ to investors largely from monies received from newer investors.

“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” said Marc Fagel, director of the SEC’s San Francisco regional office. “The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.”

According to the SEC’s complaint filed in federal court in San Jose, Geringer has raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. The complaint says that by mid-2009 the fund did not invest in publicly-traded securities at all. Instead, it invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund’s bank account.


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