The SEC has charged Alan Heide, the former chief financial officer of bankrupt cash advance company 1 Global Capital, with defrauding thousands of retail investors. The Florida-based firm is alleged to have fraudulently raised more than $322 million from 3,600 investors between 2014 and 2018.
The regulator previously charged the company’s former CEO Carl Ruderman with fraud and charged Henry Wieniewitz, III for his allegedly unlawful sales of 1 Global securities. Ruderman and Wieniewitz have consented to final judgments.
According to the SEC’s complaint, 1 Global promised investors profits from its short-term cash advances to businesses. However, the company instead used investor funds to pay for operating expenses and for Ruderman’s “lavish expenses,” such as a luxury vacation to Greece and monthly payments for his Mercedes-Benz.
“Heide’s misrepresentations gave false comfort to investors, allowing them to be duped to invest in 1 Global’s securities,” Eric Bustillo, director of the SEC’s Miami regional office, said in a statement. “We allege that as 1 Global’s CFO, Heide played a significant role in 1 Global’s fraud by overstating the value of investors’ accounts and their rates of return and falsely representing the role of an auditor.”
The SEC alleges that for nine months, Heide regularly signed investors’ monthly account statements that he knew overstated the value of their accounts, and falsely represented that the firm had an independent auditor that endorsed the company’s method of calculating investor returns.
“Heide knew 1 Global’s financial condition was depleted due to Ruderman and the company’s misuse of investor funds,” said the complaint.
Heide has been charged with violations of the antifraud provisions of the federal securities laws, and the SEC is seeking a court-ordered injunction and a financial penalty. Heide agreed to settle the SEC’s charges as to liability, without admitting or denying the allegations, and agreed to be subject to an injunction, with the court to determine the penalty amount at a later date.
It is the third action the SEC has brought against 1 Global for fraud. In the first case, Ruderman consented to a final judgment against him in which he was held liable for disgorgement of approximately $32 million in ill-gotten gains, and a civil penalty of $15 million. As part of the judgment, Ruderman agreed to turn over approximately $750,000 in cash, as well as 50% of the equity in his multimillion-dollar condominium.
Last month, the SEC filed a settled action charging Wieniewitz with securities and broker-dealer registration violations. Wieniewitz agreed to a final judgment holding him and his former company jointly and severally liable for more than $3.5 million in disgorgement and a $150,000 civil penalty.
“Although 1 Global purported to limit its offering to sophisticated or qualified investors, in reality the company and its sales agents mass marketed the investment to the public through brochures, flyers, seminars, and meetings,” said the complaint. “1 Global never checked to ensure that any of its investors were sophisticated, and although the company had a stated $25,000 minimum investment, the company sometimes waived that requirement and put no restrictions on who sales agents could offer the investment to.”