The American Integrity Prime Rate Scam

August 23, 2011

Matthew J. Ryan, 46, of Troy, NY, was the owner and sole managing member of Prime Rate and Return LLC ("Prime Rate"), which sometimes did business as American Integrity Financial Company ("American Integrity") and through which it offered fixed-rate investment products to investors. Neither Prime Rate nor American Integrity was an SEC-registered entity, although Ryan was a registered broker-dealer representative from 2004 through 2009.

Guaranteed Investment Contracts

Acting on behalf of American Integrity, Ryan solicited and received money from investors for investment contracts promising to pay a guaranteed fixed rate of interest.

Ryan periodically sent investors a Statement of Account Values ("account statement"), which disclosed a purported account number, interest rate, account value, and the credited interest.

Fraud

Federal prosecutors and regulators alleged that Ryan falsely represented to investors that American Integrity was a substantial Manhattan-based financial services firm with numerous employees and for which he was merely a representative. Of course, when I use the phrase "federal prosecutors and regulators alleged . . ." that's sort of a tip off that this whole investment contract thing didn't end up too well for the investors, who we might as well start referring to as victims.  And, going along with that dramatic foreshadowing, you sort of figured out by now that things just aren't going to end up that well for Ryan either.

Seems that Ryan was an innovative and industrious fellow.  It is alleged that he created fictitious American Integrity employees and used their names in correspondence with investors. However, not satisfied with the cast of characters that he fathered, Ryan also represented that American Integrity's address was 208 East 51st Street, located in fabulous midtown Manhattan.  What was located at that impressive sounding address was only a mail drop.  Likewise, if you called to speak to any number of fantasy employees of American Integrity, you likely used the toll-free number set up by Ryan - all calls were relayed to him as he was the company's sole representative.

If you were unlucky enough to be snared in Ryan's web, you were falsely told that your investment was safe and insured up to a certain dollar amount.  On top of that, you were also defrauded by Ryan into believing that American Integrity was qualified to serve as a custodian of individual retirement accounts and other tax-deferred investments and to receive roll-overs from such tax-deferred investments and preserve their tax-deferred status.

Diversion of Funds

Since at least 2004, Ryan apparently used American Integrity's investor funds to repay loans for the purchase or refinancing of real estate held in Prime Rate's name;  to pay other investors' returns; and to pay such personal expenses as his luxury car loans. As of March 31, 2010, Ryan had deposited some $5.6 million (including $4.8 million in investor funds) into a bank account for which he was the sole signatory.By that same date, Ryan had withdrawn or transferred

  • $1.9 million to pay American Integrity investors;
  • $845,000 to pay Prime Rate;
  • $265,000 to pay loans on real estate owned by Ryan and/or Prime Rate; and
  • $125,000 to pay expenses related to his luxury vehicles. 

Indictment

On February 22, 2011, Ryan pleaded guilty to one count of securities fraud in the Northern District of New York. United States v. Matthew John Ryan (Crim. Indictment No. 1:10-cr-00319-NAM). Ryan faces a maximum term of up to 20 years in prison, up to 3 years supervised release, a $5 million fine, an order of forfeiture, and an order of restitution to pay defrauded victims.

SEC Bar

Separately, without admitting or denying the findings of administrative proceedings instituted against him on March 15, 2011, by the SEC, Respondent Matthew Ryan submitted an Offer of Settlement, which the SEC accepted on August 19, 2011.  The SEC ordered that Ryan be barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, or from participating in any offering of penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.  In the Matter of Matthew J. Ryan, Respondent (Order Making Findings And Imposing Remedial Sanctions Pursuant To Section 15(B) Of The Securities Exchange Act Of 1934, Securities Exchange Act Release #65173, Administrative Proceeding File # 3-14297, August 19, 2011).