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SEC sues Utah man in "sandwich in a can" fraud
NEW YORK |
NEW YORK (Reuters) - The Securities and Exchange Commission has sued a Utah man for fraudulently misusing $139 million of investor funds on such things as a film about the Cub Scouts' Pinewood Derby car race and development of a "sandwich in a can."
According to a lawsuit filed Thursday in federal court in Salt Lake City, Travis Wright misappropriated all but $6 million of the $145 million he raised from about 175 investors between 2001 and 2009 by selling notes issued by his Waterford Loan Fund LLC.
The SEC said the 47-year-old Draper resident represented to investors that their money would be used for loans secured by commercial real estate.
Instead, it said he used funds for such things as a loan for Candwich Corp to develop a canned sandwich to be sold in vending machines, an investment in a company he owned with his brother to distribute a film about the Pinewood Derby, investments in companies that sell watches online and rose petals that carry printed sentiments, loans to friends, and an investment in a UBS AG brokerage account.
The SEC said Wright also used $15 million to support a "lavish lifestyle" including trips to at least 12 countries for family members and friends, a home in an exclusive suburb that was upgraded with $133,000 of landscaping and imported French cobblestones for the driveway, and as much as $20,000 of "discretionary spending money" per month for his wife.
The lawsuit seeks to recover ill-gotten gains, impose civil fines, a ban on Wright selling securities, and other remedies.
Waterford Loan Fund LLC and its Waterford Funding LLC affiliate are being liquidated in bankruptcy. This came after investors confronted Wright after they had stopped receiving interest payments, and persuaded him to transfer most of Waterford's and his personal assets, the lawsuit said.
It is unclear whether Wright has retained a lawyer for the SEC case. Calls to a phone number listed for Waterford were met with busy signals. Calls to Wright's home were not answered. A call to Wright's cellphone was not immediately returned.
The SEC case was assigned to U.S. District Judge Clark Waddoups.
The case is SEC v. Wright, U.S. District Court, District of Utah, No. 10-00602.
(Reporting by Jonathan Stempel, editing by Matthew Lewis)
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Even with a few new regulations there will simply be as many looking for the loopholes and get rich on the backs of others and trying to dupe as there are those who are trying to get rich within the laws.
The fines and sentences are also not enough to deter and those who do come out the other side seem to be even more determined to be come experts on how to work the system.
This is what a poorly regulated market looks like. A few people getting caught after the fact. A few swindlers are will go to jail, but none of the really big boys because they were wise enough to use economic mumbo jumbo and weren’t stupid enough to just call it a sandwich in a can… they called it a highly complex synthetic CDO.
Free market isn’t going to work because avarice and greed are not bad words; they are the cornerstone of American style capitalism.
I laugh because although I am not a socialist, I am deemed one because I denounce this style of Capitalism.
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