Neil Burkholz of Boca Raton and Frank Bianco of Pembroke Pines, Florida, who were charged by the SEC last year for conducting an alleged $6 million Ponzi scheme, were ordered by a Florida district court to each pay $920,825 in civil penalties, plus nearly $874,000 in disgorgement and interest.
Burkholz and Bianco, through their companies Palm Financial Management LLC and Shore Management Systems LLC, purportedly defrauded at least 55 investors, many of whom are senior citizens or small business owners.
According to the SEC’s complaint, the pair solicited investors by falsely representing that their proprietary options trading strategies were highly profitable, however, they actually invested less than half of investor funds, resulting in near-total losses. The SEC claims that they misappropriated the remaining funds to repay other investors and transferred approximately $880,000 to themselves and their spouses for personal use.
The SEC also said that Burkholz and Bianco sent false reports to investors through Palm Financial Management and Shore Management Systems to conceal their fraudulent conduct and to “give the investors the false impression they were generating positive returns.”
Burkholz was ordered to pay disgorgement and prejudgment interest totaling $429,580, while Bianco was ordered to pay $443,997.
Further, Bianco’s wife, Suzanne Bianco, who the SEC named as a relief defendant, consented to the entry of a final judgment ordering her to disgorge $49,751, representing the amount of investor funds Bianco paid her, plus prejudgment interest.
In February, the district court ordered $1.2 million in disgorgement and prejudgment interest against Palm Management and Shore Management. The SEC intends to seek approval from the court to establish a fair fund to distribute money received from defendants to harmed investors.