[B]aker and codefendant Elizabeth Oharriz engaged in a scheme to sell fictitious prime bank instruments to investors, misrepresenting the instruments as legitimate and claiming that investors would earn substantial profits. As alleged in the complaint, Baker and Oharriz defrauded five groups of investors out of over $2 million and attempted to prevent investors from uncovering the fraud by providing them with fabricated bank documents.
Investor Alerts and BulletinsInvestor Alert: "Prime Bank" Investments Are ScamsFeb. 5, 2015The SEC's Office of Investor Education and Advocacy (OIEA) is issuing this Investor Alert to warn investors about fraudulent investment schemes involving purportedly high-yield, risk-free international finance programs.All "prime bank" investment programs are fraudulent. Promoters of prime bank programs often claim that investors' funds will be used to buy and trade supposed prime bank instruments, and that investors will receive guaranteed, high investment returns with little or no risk. Promoters try to make the schemes sound legitimate by using complex, sophisticated, and official-sounding terms. These may include: debenture, standby letter of credit, bank guarantee, prime world bank financial instrument, private funding project, offshore trade or trading program, trading platform, trading facility, trade slot, high-yield trading or roll program, guaranteed bank note, or some variation. . . .
All "prime bank" investment programs are fraudulent.
The defendants promised investors extraordinary returns of up to twenty times the principal amount invested with little or no risk. To deceive them into believing the purported investment was legitimate, the defendants provided investors with documents containing meaningless legal-sounding terms and references to non-existent financial instruments and institutions. To fend off further inquiries, which might have provided information investors could have checked for themselves and found out about the fraud, investors were told that confidentiality and secrecy requirements prevented the defendants from providing details of the investments.
What is this all about? Well, for starters, On November 30, 2011, the SEC filed an enforcement action under seal in federal court in Washington D.C. and obtained an emergency court order to halt a Prime Bank scheme. Thereafter, on December 5, 2011, the Court unsealed the action.
The SEC's Complaint alleges that from at least August 2010 defendants Frank L. Pavlico, III, a/kIa Frank Lorenzo, and Brynee K. Baylor and entities they control, including defendants The Milan Group, Inc., a/k/a The Milan Trading Group, Inc., and Baylor & Jackson, P.L.L.C. conducted a "Prime Bank" scheme that defrauded at least thirteen investors out of approximately $2.1 million. I want you to digest the full caption of the Complaint so that you can appreciate the enormity of this matter:
Securities and Exchange Commission v. The Milan Group, Inc., a/k/a The Milan Trading Group, Inc., Frank L. Pavlico III, a/k/a Frank Lorenzo, Brynee K. Baylor, Baylor & Jackson, P.L.L.C., Mia C. Baldassari, Elmo Baldassari, Brett A. Cooper, Global Funding Systems, LLC, GPH Holdings, LLC, Dawn R. Jackson, Patrick T. Lewis, Susan C. Kevra-Shiner, a/k/a Susan C. Kevra, The Law Office of Susan C. Kevra (Civil Action No. 11-cv-02132 (RMC) (D.D.C. Nov. 30, 2011)
NOTE: The SEC Complaint is only an allegation, and the defendants are presumed innocent unless or until proven guilty.
When we're talking about so-called "Prime Banks" in these scams, we're not talking about any bank that you would likely know. Oh, sure, as part of the con artists' patter, they may drop some names. You may hear references to Citibank or UBS or Bank of America or JP Morgan - but they're not involved other than being victimized by having their names thrown into the garbage bin. What you may hear about are fanciful institutions such as the International Clearing Bank of the Caribbean Economic Authorities. You like that one? I made it up, took me about two seconds.
You may also be told that non-circulating bank remittances involved in sovereign debt recertification are available on a floating basis through issuance of the Royal Bank of Emirates Limited or the Brazilian Developmental Petrochemical Bank. These non-circulating sovereign debt recertifications are known in the trade as NSDRs and are available in monetized units of $100,000 subject to proof of eligibility for offshore financial placement by the issuing authority. Yup - made all of that up too, every single thing in this paragraph. Just because it sounds impressive and a lawyer assured you of the bona fides, doesn't mean jack. Wise up, people!
If the SEC's allegations are ultimately proven true, what we got here is yet another in a long, long, long line of Prime Bank scams.
READ: UPDATE: The Lawyer, Judge, Financial Wizard's Tranche Trading Platform Deal (BrokeAndBroker.com Blog / September 29, 2011) for some sense of the history and nature of these rip-offs.
Despite all the warnings that are amply and prominently posted on numerous websites, I guess a lot of wannabe investors don't really understand the need to undertake due diligence - even rudimentary.
SIDE BAR: the Prime Bank Fraud Information Center (SEC.gov)
The Complaint further alleges that defendants Pavlico and Baylor offered potential investors extraordinary returns - in one example, up to twenty times the original investment within forty-five days. If you weren't sent running for the hills when pumped with those overblown promises, you were then told that the investment involved no risk . Uh huh, sure - why wouldn't a no-risk investment offer 20 times returns within a month and a half. On top of that, the defendants allegedly promised that your principal would be returned if a successful bank instrument transaction was not completed.
You got that? Twenty times return. Only a 45-day investment window. No risk. Full return of principal if your investment is not placed as promised. I can also get you the Brooklyn Bridge for no money down and your total out-of-pocket cost is locked-in at $32,000 plus a $5,000 handling charge (payable to me up front).
As noted in UPDATE:The Lawyer, Judge, Financial Wizard's Tranche Trading Platform Deal, we seem to have a number of lawyers acting as pitch-men and -women in these transactions. The Complaint alleges that defendant Baylor "cloaked these offers in legitimacy by acting through her capacity as a licensed attorney and by identifying herself and her Washington, D.C. law firm, B&J, as counsel for Milan and engaging in the scheme through B&J." As if the legal profession needed another black eye.
I particularly like how the SEC didn't dance around with niceties in this action and truly tried to let future victims know just what is involved in these Prime Bank scams. Pointedly, the Complaint warns that:
[C]ontrary to their representations, Pavlico and Baylor never used investor funds to lease, leverage, or trade any purported foreign bank instruments. Instead, Pavlico and Baylor used investor money to purchase luxury cars such as a Range Rover and a Jaguar, make purchases at expensive restaurants and retailers including Jimmy Choo, pay for a trip to the Bahamas, pay other personal expenses, pay B&J business expenses, and make payments to the relief defendants.
Alas, I've grown tired of sounding the alarm. You wanna buy a piece of a Prime Bank note? Go ahead, be my guest. Don't do any research. Believe the unbelievable. Just do me a favor - don't send me an email suggesting that I do yet another story about this nonsense.
Finally, compliments to the SEC on not only moving relatively quickly but putting together a compelling Complaint.