Goldman Sachs and Reno, NV Settle Securities Fraud Case
According to the Reno Gazette-Journal, the city of Reno is about to settle its securities fraud lawsuit against Goldman Sachs (GS) for $750K. Nevada’s capital city claims that the firm misled it into taking on risky debt that nearly caused Reno to become insolvent. The Reno City Council will vote on approving the settlement next week. Other details of the settlement remain undisclosed at this time.
The auction-rate securities lawsuit involved over $210M in bonds issued by Reno in ’05 and ’06 to refinance the debt for an events center and another facility. The city claims that Goldman Sachs never disclosed that the ARS market was very risky or that the firm was bidding interest rates down to hold up the market.
When the financial collapse happened in 2008 and banks ceased to bid on auction rates, rates went soaring. This left Reno with a 15% debt interest rate and millions of dollars in penalties that it now owed Goldman. For example, in 2012 Reno paid the firm $2.6M. It paid the Goldman Sachs $7M the following year.
SEC Demands $5.4M Owed by Former Maine Developer in Fraud Case
The Securities and Exchange Commission is calling on Michael A. Liberty, an ex-Maine developer who settled an investment fraud case for nearly $6M in 2010, to pay the remaining $5.4M that he still owes. He paid just $600K after persuading a court that he couldn’t pay the entire fine. Liberty had settled the regulator’s securities case without denying or admitting to the charges.
The SEC claims that Liberty had improperly diverted over $9M of a $100M venture capital fund that he set up, using $4.5M of the money for himself, while losing $18M in investments investments that failed. His investors included pensions funds for public employees in the states of Connecticut, Pennsylvania, and the city of Philadelphia.
The SEC had recently filed a motion accusing Liberty of hiding money and lying about being in so much debt that he couldn’t pay the fine. Liberty disputes the regulator’s latest allegations.
Federal Judge Rules Against Jay Peak Developer in EB-5 Case
In the SEC’s case against Ariel Quiros, District Judge Darrin P. Gayles is accusing the Jay Peak Resort developer of running a scam that defrauded hundreds of investors. Gayles granted the SEC’s request for an injunction and froze the assets that Quiros had acquired using investor money, including two ski resorts and funds raised from foreign investors seeking to become immigrants in the US. Gayles refused to dismiss the SEC’s civil case against Quiros.
Quiros is accused of improperly mixing funds in a scam that involved over 100 bank accounts and 1,000 transactions while he allegedly leveraged over $100M in investor money for margin loans and another $50M for his personal expenses. He and ex-business partner/former Jay Peak CEO Bill Stenger are accused of misusing $200M of money obtained through the EB 5-Program.
They raised over $440M from more than 700 immigrant investors from 74 countries. With Quiros’ projects, foreign investors were required to put $500K in qualified projects plus pay an administrative fee. If 10 jobs were created as a result, the investor would become eligible to become a permanent US resident. Because of the alleged fraud, hundreds of these investors’ residential status in the US are now in doubt.
The SSEK Partners Group is an investor fraud law firm. We represent high net worth individual investors and institutional clients.
Reno to settle Goldman Sachs lawsuit for $750K, Reno Gazette-Journal, November 30, 2016
SEC: Michael Liberty hid money to avoid paying $6M fine in fraud case, Maine Sun Journal/AP, November 30, 2016
SEC Wins Injunction Against Quiros win $350M Fraud Case, Law360, November 21, 2016
SEC Case Freezes Assets of Ski Resort Steeped in Fraudulent EB5 Offerings, April 14, 2016