SEC Bars Advisor for $24 Million Ponzi Scheme Targeting Elderly Investors

Posted on November 6th, 2024 at 1:33 PM
SEC Bars Advisor for $24 Million Ponzi Scheme Targeting Elderly Investors

From the desk of Jim Eccleston at Eccleston Law

The Securities and Exchange Commission (SEC) has barred Paul Horton Smith, a California-based advisor, for orchestrating a $24 million Ponzi scheme that defrauded elderly and retired investors. According to ThinkAdvisor, Smith conducted this scheme from at least July 2000 through May 2020, causing 100 of his clients to lose $13 million.

Smith pled guilty in January to a federal criminal charge related to the Ponzi scheme, which, according to the Justice Department, spanned nearly 20 years and fraudulentlyvacquired more than $24 million from at least 200 investors. He also pled guilty to one count of wire fraud.

Smith operated Riverside-based companies Northstar Communications LLC, Planning Services Inc., and eGate LLC. He solicited funds from individuals, often elderly or retired, to invest in a product he called "Northstar." Many of the victims were former clients of Planning Services. Smith communicated with them about Northstar in person, over the phone, and via email and text messages. 

The SEC's order states that Smith falsely represented Northstar as an annuity or a similar investment, claiming it invested in real estate or the stock market. He assured clients that Northstar offered a minimum rate of return and was a safe investment. In reality, Smith made no legitimate investments with the $24 million he received. Instead, he used the funds to repay earlier Northstar investors to conceal his Ponzi scheme. Over 100 clients suffered losses exceeding $13 million due to Smith’s fraudulent actions.

ThinkAdvisor reports that Smith failed to respond to the SEC’s order instituting proceedings, a renewed order to show cause or a motion for default and sanctions, leading to his barring from the securities industry.

 

Eccleston Law LLC represents financial advisors and investors nationwide in securities, employment, transition, regulatory and disciplinary matters.

Tags: eccleston, eccleston law, sec

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