SEC Halts Three In Alleged $125 Million Fraud

The Securities and Exchange Commission halted an international trading program in sept, 2019 which put more than $125 million of investor funds at risk.

What was the matter?

According to the SEC's complaint, beginning in March 2016, Michael S. Young,  Michael S. Stewart, and Bryant E. Swell (managers) and their companies Mediatrix Capital, Blue Isle Markets Inc. , and Blue Isle Markets Ltd. , offered investors to invest by showing a false data of their company.

The managers told investors that their company had been earning a profit every single year for almost five years during which they had returned more than 1600%. They also claimed that their marketing strategy had allowed Mediatrix Capital to accumulate assets under management of $125 million by the end of 2018.

In reality, their trading strategy consistently lost money- lost almost $18 million dollar in 2018 alone.

They also misappropriated more than $35 million of investor money for defendants' personal use.

"We alleged that this scheme has resulted in tens of millions of dollars in investor  losses, in part, to fund defendants' luxurious lifestyle," Kurt  Gottschall, director of the SEC's Denver regional office, said in a statement.

What SEC did?

The SEC has named 20 relief defendants, which it said was a result of Young, Stewart, and Sewall transferring millions of dollars of investor's money to spouses, relatives, friends, and shell companies they owned or controlled.

Ethical problem here-

Whatever the company did was ethically wrong:

Showing a false data to the investors and using their investments for personal use is totally wrong.

Here, the defendants were doing this fraud for a long time and SEC should have found this earlier. It is their responsibility to oversee the securities market and protect the investors.