The Securities and Exchange Commission today charged two companies – including a Colorado-based financial planning firm – with conning senior citizens out of their retirement money with outlandish claims about investing in a shady bio-tech startup.
According to the SEC complaint, advisory firm Speed of Wealth convinced more than 300 investors, many of them seniors, to liquidate their pension plans and invest all the money in a bio-tech startup called Mantria.
The complaint alleges that Speed of Wealth bosses Wayde and Donna McKelvey touted Mantria's supposedly eco-friendly products, including one they called “biochar” – a charcoal substitute made from organic waste.
In addition, the McKelveys, who were divorced, persuaded investors to plow their money into a purported ‘carbon negative' housing community in rural Tennessee, the SEC said.
The regulator alleges that claims about Mantria's business were greatly overblown or, in some cases, out-and-out lies. Speed of Wealth, for instance, claimed that Mantria was the world's leading manufacturer and distributor of biochar, with a number of facilities. The investment firm claimed each of those facilities produce 25 tons per day. In fact, the SEC claims Mantria has never sold any biochar and has just one testing facility.
Indeed, Mantria's only source of revenue apparently has come from its resale of vacant lots for its purported residential communities in rural Tennessee. Those sales generated no cash with which to pay investor returns, because Mantria provided 100% financing for almost all of its vacant lot sales — using other investors' funds.
Nevertheless, Speed of Wealth allegedly promised investments in Mantria would generate returns anywhere from 17% to "hundreds of percent" annually.
The commission charged the McKelveys with violating broker-dealer registration requirements. The SEC also charged two Mantria executives, Amanda Knorr and Troy Wragg (who shared a stage with former President Bill Clinton at the Clinton Global Initiative in September), with violating the antifraud and offering registration provisions of the securities laws.
"These promoters fraudulently exaggerated Mantria's green initiatives and used high-pressure tactics to convince investors to chase the promise of lucrative returns," said Don Hoerl, director of the SEC's Denver Regional Office.
At seminars, Wayde McKelvy, along with Mr. Wragg or Ms. Knorr, generally conducted a two-part presentation in which they urged investors to cash out all of their traditional investments, including individual retirement accounts, 401(k) plans, and mutual funds. The SEC says Mr. McKelvy also encouraged investors to borrow as much as possible against home equity, parents' home equity, and business lines of credit.
According to the complaint, Mr. McKelvy recommended investors plunk down all their money in what he described as the "consistent and safe" high-yield securities offered by Speed of Wealth and Mantria. The promoters frequently alluded to Mantria's imminent closing of sales worth hundreds of millions of dollars, initial public offerings of securities that, they claimed, "are sure to be a very huge Wall Street hit."
The SEC alleges that Speed of Wealth and Mantria used investor funds to pay returns to other investors. Mantria and Speed of Wealth allegedly did not disclose that that a substantial amount of the companies' funds were used to pay commissions of 12.5 percent to the McKelvys.
Said the SEC's Mr. Hoerl: "In reality, the only green these promoters seemed interested in was investors' money.”
