The Securities and Exchange Commission (SEC) filed an asset freeze to stop Lisa McElhone and Joseph W. LaForte’s fraudulent scheme worth $500 million. The scheme involved raising investor funds via unregistered securities offerings for Complete Business Solutions Group. Complete Business Solutions is a cash advance company that conducts business as Par Funding. Others involved in the alleged scheme include brokers Perry S. Abbonizio who previously worked for Morgan Stanley and Dean J. Vagnozzi who was suspended by the SEC.
LaForte has a background working for various broker-dealers where he obtained a Series 7 and Series 63 license in 1996 and a series 24 license in 1997. However, LaForte’s licenses have expired.
A complaint alleges that “the McElhone-LaForte duo is in the business of making opportunistic loans – some of which charge more than 400% interest – to small businesses across America.” For a period of five years, from August 2012 to December 2017, Par Funding primarily issued promissory notes and offered them to the investing public directly and via a network of sales agents. However, in January 2018, the Pennsylvania Securities Regulators began investigating Par Funding for violating state securities laws via its use of unregistered sales agents. In response, Par Funding notified the Pennsylvania Securities Regulators that they terminated their agreements with unregistered sales agents, however that wasn’t entirely true.
As a result of the investigation and to continue to fuel its loans, Par Funding began using “Agent Funds” to issue their own promissory notes, selling the notes to the investing public through unregistered securities offerings, thus funneling funds to Par Funding. Par Funding compensated the “Agent Funds” by issuing Par Funding promissory notes, which offered higher rates of return than what the “Agent Funds” were obligated to pay investors under the “Agent Funds” notes. Abbonizio and Vagnozzi oversaw the “Agent Fund” operations for the scheme.
The complaint by the SEC charges the defendants with violating antifraud provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the securities registration provisions of the securities Act. The SEC continues to seek the disgorgement of ill-gotten gains, prejudgment interest and civil penalties.
For the full case, click here.
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