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SEC Obtains Final Judgments Against Pair of Entities Connected to $18 Million Ponzi Scheme

The U.S. Securities and Exchange Commission obtained final judgments against Strategic Legacy Investment Group Inc., or SLIG, and SLIG High-Interest Liquid Savings Company, aka SLIG High, two entities the SEC charged with an alleged Ponzi-like scheme and misleading investors who had purchased more than $17.5 million in promissory notes.

The amended complaint alleged that SLIG and SLIG High raised money from retail investors for the purported purpose of investing in real estate. SLIG and SLIG High raised this money through the unregistered offer and sale of promissory notes, which they represented paid “guaranteed interest” above market interest rates offered by banks, often as high as 9%. According to the complaint, SLIG and SLIG High represented to investors the notes were “safe” and “secure” because they were backed and collateralized by SLIG’s portfolio of assets and were recession-proof. The complaint further alleged SLIG and SLIG High treated investor funds as one pool of money, commingled investor funds, and diverted new investor funds to make Ponzi-like payments to existing investors totaling at least $4.2 million.

They are also alleged to have made materially false and misleading statements to investors by failing to disclose that they were not profitable, as their assets did not generate enough revenue to pay promised returns, and investors did not have any collateralized interest in real estate. When SLIG was unable to pay promised returns, it blamed the economic impact of the COVID-19 pandemic for its failure to pay, but continued to send investors false account statements showing ever-growing account balances from interest payments that were never made.

The court entered final judgments permanently enjoining SLIG and SLIG High from violating: (1) the antifraud provisions of Section 17(a) of the Securities Act of 1933; (2) section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and (3) sections 5(a) and 5(c) of the Securities Act. SLIG was ordered to pay disgorgement in the amount of nearly $4.9 million, representing net profits gained as a result of the conduct alleged in the complaint, together with prejudgment interest thereon in the amount of approximately $487,000. SLIG was also ordered to pay a civil penalty in the amount of approximately $1.15 million. SLIG High was ordered to pay disgorgement in the amount of nearly $648,000, representing net profits gained as a result of the conduct alleged in the complaint, together with prejudgment interests thereon over $64,000. SLIG High was also ordered to pay a civil penalty in the amount of approximately $1.15 million.

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