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SEC Acts Against $6 Mln Ponzi Scheme Targeting Senior Citizens

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The U.S. Securities and Exchange Commission said it has filed an emergency action and received a temporary restraining order and asset freeze against two Florida residents as well as the two companies controlled by them for an alleged $6 million Ponzi scheme.

The Ponzi scheme by Neil Burkholz of Boca Raton, Florida, and Frank Bianco of Pembroke Pines, Florida, defrauded at least 55 investors, many of whom are senior citizens or small business owners, according to the SEC's complaint.

The SEC's complaint, which charges the defendants with securities fraud, was filed in federal court in Miami on November 14 and unsealed Monday, November 18.

The complaint also named Burkholz's wife, Rhoda Burkholz, and Bianco's wife, Suzanne Bianco, as relief defendants.

The accused scammers solicited investors by falsely claiming that their proprietary options trading strategies were highly profitable, the SEC noted. They solicited investors through their two companies, Palm Financial Management LLC and Shore Management Systems LLC.

However, the defendants only invested less than half of the investor funds and those investments resulted in near-total losses.

The defendants allegedly misappropriated the remaining funds, using the money to repay other investors. They also transferred about $880,000 of investor funds to themselves and their spouses for personal use.

In order to hide their fraudulent conduct, the defendants sent false reports to investors giving the false impression that they were generating positive returns.

The SEC's complaint seeks certain emergency relief as well as permanent injunctions, return of allegedly ill-gotten gains with prejudgment interest, and civil penalties.

The SEC noted that the emergency relief prohibits the defendants from soliciting new investors and freezes their assets, while ordering them to provide a sworn accounting of their assets.

In late September, the SEC charged three foreign individuals with deceiving U.S. investors, including retirees, through fraudulent, online sales of high-risk securities known as binary options.

According to the SEC, the three foreign nationals - Gil Beserglik, Raz Beserglik and Kai Christian Petersen - deceived U.S. investors, who lost tens of millions of dollars through the fraudulent transactions. Some individual retirees lost their entire savings amounting to hundreds of thousands of dollars.

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