SEC Charges Two Florida Men in Ponzi Scheme Defrauding Teachers and Retirees

August 29, 2011 (PLANSPONSOR.com) – The Securities and Exchange Commission (SEC) charged two Florida men with operating a Ponzi scheme disguised as a private equity fund that fraudulently raised approximately $22 million from more than 100 investors, many of whom were Florida teachers or retirees. 

 According to a news release from the SEC, the complaint filed with the U.S. District Court for the Middle District of Florida, James Davis Risher of Sanibel was responsible for handling the fund’s trading operations, and Daniel Joseph Sebastian of Lakeland distributed offering materials and solicited investors for the fund. Risher boasted to investors he had substantial experience in trading equities and providing wealth and asset management services. In reality, the SEC says Risher had no such experience, but rather a lengthy criminal history, spending 11 of the last 21 years in jail instead of growing a thriving retail brokerage business as he claimed.

The SEC alleges Risher and Sebastian falsely told investors the fund earned annual returns ranging from 14% to 124% by investing in public equity securities through a broker/dealer. They sent investors fabricated account statements indicating such high returns to support their false claims. Only a fraction of the money raised was actually invested, and Risher instead misspent investor funds on such personal purchases as jewelry, gifts, and property in North Carolina and Florida. Risher and Sebastian also paid themselves millions of dollars in phony management and performance fees.

“Risher, who masqueraded as a highly successful equity trader, teamed up with Sebastian to tout sophisticated trading strategies they claimed would generate substantial profits for investors. Instead, Risher and Sebastian used investors’ life savings and retirement nest eggs to line their own pockets,” said Eric Bustillo, Director of the SEC’s Miami Regional Office.

According to the SEC’s complaint, Risher and Sebastian marketed the fund under the names Safe Harbor Private Equity Fund, Managed Capital Fund, and Preservation of Principal Fund. They described themselves in fund offering documents as “two unique individuals” who used their expertise to “create an investment vehicle that would allow investors to capitalize from both bull and bear markets.”