SEC Charges S.C.-Based Lawyer in Scheme Promising Investors Returns as High
as 4,900 Percent
FOR IMMEDIATE RELEASE
2010-41
Washington, D.C., March 18, 2010 -- The Securities and Exchange
Commission today charged a South Carolina-based attorney and a cohort with
securities fraud for bilking investors in a high-yield investment scheme that
promised rates of return as high as 4,900 percent in just two months.
The SEC alleges that M. Mark McAdams of Myrtle Beach, S.C., and R. Dane
Freeman of Flat Rock, N.C., enticed investors by telling them they would
generate the high returns through their firm – Global Holdings LLC – by buying
bonds or notes directly from issuers at a discount and then quickly reselling
them for a profit on international trading platforms.
According to the SEC’s complaint, McAdams used the letterhead and e-mail
system of the law firm where he worked to communicate with investors and conduct
Global Holdings business, without the firm’s knowledge. Global Holdings never
purchased or sold bonds, and investors never received the profits promised. Some
investor money was diverted to pay Freeman’s family and friends as well as a
personal debt he owed.
“McAdams and Freeman promised astronomical returns that they could not
possibly deliver. Such statements, especially when they come from a practicing
attorney, are of particular concern to the Division of Enforcement,” said Rhea
Kemble Dignam, Director of the SEC’s Atlanta Regional Office.
The SEC’s complaint, filed in federal district court in Columbia, S.C.,
alleges that McAdams and Freeman raised more than $3.5 million from
approximately 35 investors through joint venture agreements in which they
represented that Global Holdings would use investor funds to buy and sell
Standard and Poor’s AAA or AA rated bonds or Medium Term Notes and trade them
overseas to earn profits. Some of the joint venture agreements represented that
investors who invested $20,000 would receive $1 million after 60 days, a return
of 4,900 percent. Global Holdings never made these payments to investors, yet
McAdams and Freeman continued to raise investments for the firm from new
investors.
The SEC alleges that McAdams and Freeman misrepresented the success of their
purported trading program to investors. According to the SEC’s complaint,
McAdams misled at least one potential investor by falsely claiming that Global
Holdings had already participated in hundreds of transactions that produced
hundreds of millions of dollars for dozens of investors. Freeman told another
potential investor that members of Global Holdings had invested $2 million of
their own funds, made at least $200 million, and distributed $50 million to
themselves while reinvesting the rest. To substantiate his false claim that he
received a substantial distribution himself, Freeman sent the potential investor
a document showing that Freeman had $11 million in a trust account that
represented his share of the proceeds. In reality, the trust account was
established by Freeman’s parents, did not contain any proceeds from the Global
Holdings program, and had an actual of value of $1.34 million instead of the $11
million that Freeman purported to show in the document.
The SEC’s complaint alleges that McAdams and Freeman have violated the
antifraud provisions of the federal securities laws, Sections 17(a) of the
Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934
and Rule 10b-5 thereunder. The Commission’s complaint seeks (i) a permanent
injunction against future violations; (ii) disgorgement of ill-gotten gains plus
prejudgment interest; and (iii) imposition of financial penalties.
The Commission thanks the South Carolina Securities Division for its
assistance in this matter.
# # #
For more information about this enforcement action, contact:
William P. Hicks
Associate Regional Director for Enforcement, SEC’s
Atlanta Regional Office
404-842-7675
http://www.sec.gov/news/press/2010/2010-41.htm
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