The Securities and Exchange Commission obtained a final judgment against California-registered investment adviser representative Paul Horton Smith Sr., his companies Northstar Communications, LLC and Planning Services Inc., and his California-based registered investment adviser eGate LLC for perpetrating an investment fraud that targeted retirees and pre-retirees in Southern California.
The SEC’s complaint alleged that Smith and his entities defrauded at least 35 investors out of more than $5.6 million by falsely claiming that he and Northstar would pay investors guaranteed interest payments based on investments in specified products.
The complaint alleged that they failed to invest the funds raised as promised and instead used new investor funds to pay investor returns in a Ponzi-like fashion.
Smith was previously charged in a parallel criminal action and is currently awaiting trial.
The final judgment permanently enjoins all four defendants from violating the antifraud provisions of various federal securities laws. The judgment also orders the defendants, jointly and severally, to pay disgorgement of $4.2 million in ill-gotten gains plus prejudgment interest of $383,000, and orders Smith to pay a civil penalty of $4.2 million.