The US Securities and Exchange Commission has filed senior investor fraud-related charges against Houston pastor Kirbyjon Caldwell of the Windsor Village United Methodist Church and financial planner Gregory Alan Smith. The regulator is accusing them of defrauding older investors of over $1M through the sale of pre-Revolutionary Chinese bond interests.
Smith runs the Smith Financial Group. The SEC permanently barred him from associating with brokerage-firms in 2010 after he was accused of misappropriating investor money. Caldwell is senior pastor at reportedly one of the biggest Protestant churches in the US.
According to the regulator, in 2013 and 2014, the two men solicited older investors in an attempt to sell them bonds that they claimed were valued at billions of dollars when, in truth, the bonds were “collectible memorabilia” that lacked any “meaningful investment value.”
Smith allegedly told investors he was an investment adviser who had years of experience helping other investors. He is the one who recommended to investors whether they should get involved in the bond interest investments. He had long-term connections with a number of the prospective investors whom he targeted.
The SEC noted that in one instance, Smith told a woman she would make 15 times the amount of her actual investment within 30 days, and, if she ever asked for her money back, she would receive the funds within five days. He also allegedly told her that he himself had invested $250K in the bonds.
Smith is accused of telling other investors that the bond offering was limited to just a “few select clients” and that some of the funds would go toward acquiring more Chinese bonds. He touted the investments as safe and risk-free.
Meantime, Caldwell made similar misrepresentations. One person whom he solicited invested about $800K after the pastor told him that gold or silver backed the bonds. The SEC said that the fact that a known pastor was involved made it easier for people to trust Smith.
However, according to an SEC court document, the bonds, which were issued decades ago, are not worth the “tens, if not hundreds, of millions of dollars” that Smith and Caldwell claimed. Not only did the bonds default and have stayed that way since 1939, but also the Chinese Government today does not “recognize the debt.”
Caldwell and Smith were able to raise at least $3.4M from 29 investors, most of them seniors and some of whom liquidated their annuities, so that they could invest. The two of them then allegedly used about $1.8M for their own spending, including luxury vehicles for Smith and mortgage payments for Caldwell. Most of the rest of the money went to offshore individuals.
Now, the SEC is charging the two men with violating federal securities laws’ antifraud provisions. It wants disgorgement, penalties, and other relief.
Meantime, the regulator also filed civil charges against lawyer Shae Yatta Harper for allegedly aiding and abetting the antifraud violations that Caldwell and Smith are accused of committing. Harper has settled the SEC’s case, but she is not denying or admitting to the allegations. She will pay a $60K civil penalty and is suspended from practicing or appearing as a lawyer in front of the regulator for five years.
In a parallel criminal case, the US Justice Department announced that Smith and Caldwell are charged with multiple counts of money laundering and wire fraud, as well as single counts of conspiracy to commit money laundering and conspiracy to commit wire fraud. Prosecutors accusing them of defrauding investors of over $1M.
Our Texas securities fraud lawyers represent investors throughout the state, as well as investors throughout the US. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Our senior investor fraud attorneys work with older investors and their families.
More Blog Posts form SSEK Law Firm:
Wedbush Securities Faces Failure to Supervise Charges Over Broker’s Pump-And-Dump Scam, Stockbroker Fraud Blog, March 28, 2018
Massachusetts Regulator Accuses ARO Equity of $5.8M Ponzi Scam that Bilked Seniors, Stockbroker Fraud Blog, March 26, 2018
Fund Manager Accused of Losing $178M in Residential Mortgage-Backed Securities is Barred from the Industry, Institutional Investor Securities Blog, February 16, 2018
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