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Michigan Broker Charged In Ponzi Case
The Securities and Exchange Commission on Monday accused a part owner of a now-defunct firm known as Fast Frank Inc. of persuading more than 800 investors -- many of them elderly -- to refinance their homes and invest millions of dollars in worthless securities.
The agency filed a civil lawsuit in Michigan federal court alleging that stockbroker Frank Bluestein acted as the single largest salesperson in a $250 million Ponzi scheme that the SEC shut down in 2007 after it filed civil charges accusing Edward May and E-M Management Company LLC of fraud.
The SEC doesn't allege that the 59-year-old Mr. Bluestein knowingly solicited older investors to invest in a fraud. But the agency's complaint says he failed to conduct due diligence before telling seniors that E-M securities were low-risk investments, and did little to investigate the legitimacy of E-M offerings despite being confronted with what the SEC says were numerous red flags.
The agency also alleges that Mr. Bluestein failed to disclose that he received $2.4 million of commissions from May and E-M on top of the $1.4 million in disclosed compensation he got from Fast Frank.
David Foster, an attorney representing Mr. Bluestein, said his client has been trying to help the SEC with its investigation and was personally devastated by the alleged fraud after investing nearly $1 million of his own money. He faces more than 100 pending investor arbitrations through the Financial Industry Regulatory Authority, as well as a class-action lawsuit.
