5. Defendants Pastor Kent R.E. Whitney and Pastor David Lee Parrish are running at least a $25 million Ponzi scheme targeting primarily the Vietnamese community of Orange County, California, through their purported church, The Church for the Healthy Self, a/k/a CHS Trust ("CHS"), and a related entity, CHS Asset Management Inc. ("CAM"), which are both Texas corporations operating out of a strip mall in Westminster, California. Using presentations, radio and television advertisements, and YouTube videos, the defendants falsely promise investors, among other things, at least 12% annual returns that are tax-deductible, guaranteed, and insured by the FDIC and SIPC. Whitney founded The Church for the Healthy Self three months after being released from federal prison for defrauding investors in a scheme assisted by Parrish, a fact Defendants concealed from potential investors.6. Defendants lured investors by promising to open investor accounts on their behalf "under the CHS Trust umbrella of non-profit" that would provide "safe and secure growth," offering market upside without exposing investors to market declines or any loss of principal. CHS promised investor money would grow tax free, and told investors that CHS would donate a portion of an investor's profits to their choice of charities. CHS explained to investors that it was able to generate high returns-as high as 43% annually -with "minimal to no risk" by investing their funds in the reinsurance industry. Whitney assured investors they would only lose money in the event of a "nuclear war." CHS also assured investors that they would have access to their money for major purchases, such as cars and vacations. CHS told investors it was not a Ponzi scheme, but is managed by Wall Street investors, audited by KPMG, and is a "well-run company that brings big returns" to its investors. . .
18. In September 2011, Whitney pled guilty to one count of wire fraud in connection with the margin call fraud scheme. See United States v. Whitney, Case No. 1:11-cr-108 (N.D. Ill. [Eastern Div.]). As part of his scheme, he obtained more than $600,000 from approximately 10 investors for a purported commodity pool investment and for trading in futures accounts to be held jointly between Whitney and the investors. He misrepresented the use of investor funds, investor returns, and the investment's risk. Whitney misappropriated most of the money he received, generated bogus account statements, and made Ponzi payments. On December 8, 2011, Whitney was sentenced to 44 months imprisonment. Whitney was released from federal custody in June 2014.
CHICAGO-A former Chicago options trader was sentenced to 44 months in prison for engaging in an investment fraud scheme in which he swindled more than $600,000 from approximately 10 victims who invested with him. The defendant, Kent R.E. Whitney, had pleaded guilty to wire fraud in September, and was sentenced yesterday by U.S. District Judge Virginia Kendall in Federal Court. He was ordered to begin serving the sentence Jan. 26, 2012. Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent in Charge of the Chicago Office of the Federal Bureau of Investigation, announced the sentence today.Whitney, 29, of Chicago, at various times traded through different entities, including Lone Star Trading, and had trading privileges on CME Group, Inc. markets prior to and during 2009. He obtained more than $600,000 from approximately 10 investors since 2009, both for a purported commodity pool investment, and for trading in futures accounts to be held jointly between Whitney and the victims. He returned approximately $230,000 as so-called investor redemptions and misused most of the remaining funds for his own benefit and for the benefit of acquaintances. The CME Group owns and operates the three U.S. futures exchanges that formerly went by the names Chicago Mercantile Exchange, Chicago Board of Trade, and New York Mercantile Exchange.According to court documents, from mid-2009 through late 2010, Whitney made false representations to investors concerning the use of investors' funds, the returns investors could expect to make, and already had made, on their investments, and the risks involved in the investments. Whitney admitted that he misappropriated most of the invested funds and concealed his misappropriation by creating and distributing phony account statements and making Ponzi-type payments of returns to investors.In October 2009, one victim invested $40,000 with Whitney to trade options through Lone Star. Whitney told the victim that he would earn a 50 percent annual return trading options and they would split the profits evenly. Whitney gave the victim a phony document that purported to be a Lone Star account statement showing that the victim's investment had grown to $47,250 in just over a month. Whitney did not use the victim's funds to trade options, but instead used the funds for his own purposes, and a few days later most of the funds were used to buy a Maserati M128 GT Coupe.In December 2009, another victim invested $15,500 from her daughter's college fund in Lone Star through Whitney. Whitney told the victim that Whitney had earned approximately 22 to 26 percent interest per month trading her funds in Lone Star, when he actually misappropriated all of the funds.Between January and November 2010, the CME Group suspended Whitney from trading on CME markets three times as a result of his unrelated options trading activity. Each trading suspension prohibited Whitney from trading, placing or taking trading orders for others, or soliciting any business concerning CME products. Nonetheless, Whitney solicited $240,000 from another victim between January 2010 through August 2010, purportedly for Whitney to trade options on behalf of the victim. Whitney did not disclose to the victim that Whitney was currently subject to a trading suspension. Whitney did not use the victim's funds to trade options. However, Whitney provided the victim with phony documents purporting to be account statements from a trading firm showing the use of his funds to trade options. Whitney returned to the victim approximately $44,000 that Whitney claimed to be "returns" from the trading, but these "returns" were not profits from his trading but rather a return of some of the victim's own funds invested with Whitney. The remainder of the victim's invested funds were not traded, but were misappropriated by Whitney and were also used to make Ponzi-type payments to earlier investors.In July 2010, another victim invested $50,000 with Whitney so Whitney could trade options on behalf of the victim. Whitney did not disclose to the victim that he was currently subject to a trading suspension. Whitney guaranteed a 5 percent monthly return to the victim, and told him that the only way he would not receive his monthly returns was in the case of a "nuclear war." Whitney did not trade options with the victim's funds, but instead misappropriated the funds and used them for his own purposes and to make Ponzi-type payments to earlier investors. . .
19. In August 2014, Whitney became an ordained minister through an online program. A month later, Whitney formed CHS, purportedly as a nonprofit, religious organization. CHS's websites provide the facade of a "virtual church." For example, they provide links to YouTube channels offering religious videos and online prayer requests forms. But CHS does not hold religious services typically associated with churches. The primary mission of the church appears to be obtaining investor funds.20. Whitney and Parrish reprised their partnership in 2018 when Parrish joined CHS as a pastor, and as the director of CHS Trust.21. CHS mass markets its CHS Trust investment program to the public on its websites, including www.churchforthehealthyself.org, and heavily advertises its program on Vietnamese radio and television stations in Orange County, California. One such CHS television commercial, in Vietnamese with English subtitles, states: "Hello, I would like to introduce you to an investment program earning 12% interest from CHS Trust. Safe, effective, and insured by FDIC and SIPC. CHS Trust investment program gives you higher interest than 401K or IRA with maximum tax benefits. Register for a free seminar to learn about the 12% interest rate program at CHS Trust every Wednesday at 6pm." . . .
I want to take a moment here to remind all my BrokeAndBroker.com Blog readers that a Complaint merely contains allegations and that the Defendants are presumed innocent unless and until proven guilty in a court of law by a preponderance of the evidence. Okay -- ya got that? Great.
Open Your Hearts . . . and Wallets
Oddly, the Church's website is still up and running, and if you visit the "About Us" page
you will learn, among other things the following:
At CHS, our goal is to create a lasting gift of giving through education to spread the words of God; through prayers to bring peace of mind and wellbeing with God; and through charitable giving, delivering the maximum benefits to our members and providing the most to those in need in the name of God. With access to the right resources, people can become empowered by their own abilities and gain the confidence to fulfill their potential.
We teach the doctrines of our Savior in prayer, and invite you to open up your hearts and allow his grace to penetrate into your soul and being. Pop in today and join our community. CHS provides Educational Service with our Online Video Seminars guiding you through the Bible's teachings and learning about the words of God. We also make the most of your Charitable Giving providing a simplified approach to maximizing your charitable contributions and tax benefits so you can give even more through our Mutual Giving Fund and Partnership Trusts.
In seeking to enjoin the Defendants and to obtain various forms of financial penalties, the SEC's Complaint contains a section titled: "Prayer for Relief." Indeed !