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SEC Charges Six Men In $300 Million Ponzi Scheme Involving Purported Gold Mining Investments

10 June 2010, 16:25 p.m.
By Kitco News

http://www.kitco.com/reports/wooten_SECjune102010.html

Washington -- (Kitco News) --The U.S. Securities and Exchange Commission on Thursday charged four Canadian men and two others living in Florida with perpetrating a $300 million international Ponzi scheme on investors in a purportedly successful gold mining operation.

The SEC alleges that Milowe Allen Brost and Gary Allen Sorenson of Calgary were the primary architects and beneficiaries of the scheme that persuaded more than 3,000 investors across the U.S. and Canada to invest their savings, retirement funds and even home equity. Brost and his sales team presented themselves as an independent financial education firm that had discovered profitable investment opportunities with companies involved in gold mining, the SEC said in a press release.

The statement also said they held seminars where they promised investors they could earn 18 to 36 percent annual returns by investing with these companies, and they claimed the investments were fully collateralized by gold.

Unbeknownst to investors, they were actually investing in shell companies owned or controlled by Brost or Sorenson, the SEC charged. The regulatory agency said investor funds were often transferred multiple times through numerous bank accounts held as far away as Asia, Europe and South America, and then ultimately used to make “interest payments” to investors, fund the few unprofitable companies that actually had operations, and personally enrich Brost, Sorenson and others involved in the scheme.

“Brost and Sorenson orchestrated a complex, far-reaching fraud disguised by a labyrinth of companies and foreign bank accounts they used to hide their misconduct from investors and law enforcement,” said Donald M. Hoerl, director of the SEC’s Denver Regional Office.

According to the SEC’s complaint, filed in U.S. District Court for the Western District of Washington, Brost and his sales team – called Structurists – sold investors shares in a series of shell companies. They then put their money through a “structuring” process that culminated with the transfer of funds from Syndicated Gold Depository (SGD) to Merendon Mining Corp. Ltd. – which was purportedly a successful gold mining and refining company that would pay investors out of its profits.

The SEC said Brost and Sorenson concealed their ownership and control of SGD by using personal aliases, corporate entities and trust agreements with nominee shareholders. Sorenson, who controlled Merendon, claimed to be a successful businessman receiving loans from SGD through arms-length transactions, according to the complaint. Sorenson hosted tours for potential investors at his Honduran refinery and demonstrated the pouring of gold bars while making false claims about the profitability of his company, the SEC said.

The SEC alleges that investor money whirled through accounts located in the U.S. and Canada as well as the Bahamas, Belize, Bermuda, Ecuador, Honduras, Malaysia, Panama, Peru, Portugal, and Venezuela. Brost and Sorenson diverted investor funds for their personal benefit, using millions of dollars to purchase and renovate extravagant homes, ranches, and recreational vehicles. Sorenson also purchased and outfitted a luxury fishing resort in South America.

The individuals charged in the SEC’s complaint in addition to Brost and Sorenson:

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Larry Lee Adair of Fort Lauderdale, Fla.;Ward K. Capstick, a Canadian citizen who lives in Snohomish, Wash.; Bradley Dean Regier of Calgary; and Martin M. Werner of Boca Raton, Fla.

The SEC’s complaint charges four companies: SGD, Merendon Mining Corp. Ltd., Merendon Mining (Nevada) Inc., and the Institute for Financial Learning Group of Companies, Inc.