Dallas-based Prestige Equity ordered to cease what state calls fraudulent investment program
Prestige Equity used Facebook to advertise to potential investors, guaranteeing annual returns of 12%.
For a seasoned investor, this should have been the first of many red flags, according to state regulators and an investment expert. Returns cannot be guaranteed.
The Dallas-based company also said on its website that it has been around for 20 years, while state records show it was incorporated in January 2021.
Last week, the Texas State Securities Board ordered Prestige Equity to stop what the regulator describes as a fraudulent securities offering. The state said the company claims to have sold investments to 10,000 investors who invested $ 250 million in total, earning $ 30 million in interest.
The state agency said its emergency cease-and-desist order was necessary to “Protect Texans from immediate and irreparable damage.”
Recipients of the order include Senior Account Manager Robert Clemmons, CEO Felix Crayborn, COO Grant Myers, CFO William Clark and Director of Marketing Miranda Shawns.
The morning news from Dallas contacted Prestige Equity via their primary email, as well as Clemmons and Crayborn emails and phone numbers. Clemmons’ voicemail said his number was created through Google Voice, a free service that gives you a number to send texts, calls, and voicemail. Crayborn’s number was created by TextNow, an app that gives you a phone number for texting and calling.
All will be served at the address that Prestige Equity lists on its website as its corporate headquarters, 1910 Pacific Ave. There is no record of Prestige Equity having an office or registered office at the address listed, according to the Dallas Tax Assessment site and state ordinance.
Securities commissioner Travis J. Iles, who entered the order, said the emergency order was also sent to Prestige Equity electronically due to concerns about the physical address of the company. As of Tuesday, the state had not received any requests to hear from business leaders, he said.
The state is investigating whether investors included non-Texans, Iles said.
Prestige Equity is not registered with the state to sell investments in Texas, according to the ordinance.
The company offers limited partnerships in its private equity fund, which invests in a diversified portfolio comprising small business loans and real estate, according to the ordinance. The minimum investment is $ 10,000 with a one year term.
On Tuesday, the company’s website said the “fund is currently closed” and displays a countdown that indicates it will accept new investors in 25 days.
Prestige Equity says the investment is “safe and secure” against high-risk investments and market volatility, according to the ordinance. He also writes in his client agreement forms, a copy of which The news obtained, that he sold “bonds qualified by the SEC.” However, the SEC “never approves an offer,” according to an SEC alert.
The news was first alerted about Prestige Equity on June 7 via advice from Barry Minkow, who served seven years in prison for starting ZZZZ Best, a carpet cleaning company that was a front for an infamous scheme Ponzi scheme in the 1980s. After his release from prison, he served as a pastor and informant for the FBI through its Fraud Discovery Institute until he admitted to deliberately lowering the stock price for the Ponzi scheme. Lennar house builder and also defrauding his church.
He now works in Mission Hills, Calif. At Hope of the Valley Rescue Mission, which works to end poverty, hunger and homelessness.
Minkow said social media ads help legitimize businesses in the eyes of consumers, just as her appearances on shows like Oprah Winfrey’s talk show helped legitimize ZZZZ Best.
“But we really cleaned the carpets,” he said. “At least we did something.
Minkow, who began investigating Prestige Equity on his own after spotting an announcement guaranteeing a 12% annual return, submitted his findings to the Securities and Exchange Commission and the state on April 19. Minkow sent The news his complaint to the SEC.
“When you’ve broken all the laws, you’re an expert,” he said.
The SEC generally takes longer to investigate cases than the state. This is why Minkow also sent his findings to the state, which can order a ceasefire and abstain more quickly, he said.
“I couldn’t stand it,” he said, saying the SEC is using outdated techniques to catch scammers who rely on social media. “There is no reward for submitting information to the state, so why would I?” Stop these people, whether it benefits me or not.
The SEC compensates whistleblowers who provide information leading to financial recovery of $ 1 million or more. In these cases, whistleblowers are entitled to between 10% and 30% of the money raised.
SEC regional director David Peavler declined to explain how his agency learned about Prestige Equity.
David Stein, former chief investment strategist at Cincinnati-based Fund Evaluation Group, LLC, which has $ 74 billion in assets, said one of the first things investors should do when looking at a business is is to verify on its disclosure page that it is registered with the SEC. .
Stein, whose Money for the Rest of Us podcast has 15 million downloads and who wrote a book of the same name, said companies should also have a track record for potential investors to check out and see if its returns are. legitimate. Over time, returns should have some volatility, he said. If they’re too consistent, that should be a wake-up call, he said.
Finally, Stein suggested that investors do their due diligence to understand the investment itself and how it makes money, as well as how to get their money back and under what circumstances.
Investments that are too good to be true can be a stumbling block for new investors and people behind on retirement savings, Stein said. If they’re behind on savings, they may feel hopeless and want to win, he said. Less sophisticated investors tend to be drawn to higher risk areas because they look “sexy and exciting,” he said.
There are always winners and losers in investing, he said.
“In tennis you don’t take a racket and immediately start playing against professionals,” said Stein. “But by investing, you do. “