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Securities America to Pay Additional $1 Million to Massachusetts MedCap Investors

Securities America will pay 63 Massachusetts investors $1 million in the final chapter of a case brought against the independent broker-dealer for the sale of $697 million in promissory notes issued by Medical Capital Holdings.

Medical Capital Holdings, a $1.7 billion Ponzi scheme which operated out of offices in Anaheim and Tustin, California, raised money from investors who were told their money would be used to purchase account receivables from accredited medical providers, make secured loans and provide money for general operating expenses.

“The notes Securities America sold were sold under a regulation exemption that allows sale to sophisticated and accredited investors, but these were pushed at dinner seminars for as many as 100 people at a time who were never asked if they were sophisticated and accredited investors,” said William Galvin, the Secretary of the Commonwealth of Massachusetts.

Last year, Joseph Lampariello, the former president and chief operating officer of MedCap was sentenced to 10 years in federal prison for running the Ponzi scheme, and was ordered to pay nearly $40 million in restitution.

“People who invested their life savings in these soon-to-be-worthless notes are precisely the people that the Department of Labor’s fiduciary rule is designed to protect,” said Galvin. “These were people trying to protect their savings, but were sold high-risk products which garnered high commissions for the broker-dealer.”

Securities America was the largest seller of the MedCap promissory notes and collected more than $26 million in compensation. In 2011, Securities America was ordered to pay $2.8 million in restitution to the Massachusetts investors. That same year, the broker-dealer paid $150 million to settle arbitration and lawsuit claims for selling MedCap notes, as well as interests in another Ponzi scheme called Provident Royalties.

Securities America was previously owned by Ameriprise Financial but was sold to Ladenburg Thalmann Financial Services Inc. (NYSE: LTS) in 2011.

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