SEC Charges Ponzi Schemer Who Preyed on Elderly
The Securities and Exchange Commission (SEC) charged Detroit-area stock broker Frank Bluestein with fraud, alleging that he lured elderly investors into a $250 million Ponzi scheme.
In a complaint filed with the U.S. District Court for the Eastern District of Michigan, the SEC alleges that Bluestein convinced investors—specifically targeting retirees and the elderly—after convincing many of them to refinance their home mortgages. Bluestein acted as the single largest salesperson in the Ponzi scheme operated by Edward May and his company, E-M Management Company LLC (E-M), which the SEC charged in May.
The SEC said that, through his company Maximum Financial, Bluestein conducted so-called “investment seminars” in Michigan and California to lure investors into investing in E-M securities. Bluestein raised approximately $74 million from more than 800 investors over a five-year period.
The SEC said that Bluestein misrepresented to investors that the investments were low-risk and that he had conducted adequate due diligence of the investments; in fact, he did little to investigate the legitimacy of the E-M offerings even when confronted with serious red flags about the existence of some transactions. Bluestein also did not disclose that, in addition to $1.4 million in disclosed compensation, he received $2.4 million in commissions from May and E-M.
The SEC is seeking a permanent injunction against Bluestein, as well as repayment of the ill-gotten gains and financial penalties.
The latest enforcement action represents another unraveling of a Ponzi scheme amid the recession (see “Recession Foils Ponzi Schemers Game“). Fraudsters are known to target the elderly and retirees (see “FINRA Bars Brokers in Multimillion-Dollar Ponzi Schemes“).