Affinity Scheme Tied to the OutDoors
Offering fraud actions frequently are the largest group of cases filed by the Commission during any period or, if not the largest group, at least one of the largest groups. Within that group of cases are those which are based on targeting a particular group, frequently one to which the implementer of the scheme belongs. Over the years there have been schemes based on race, religion and a host of similar identifiable subgroups. The latest group may, however, plow new ground – it is composed of those with an affinity for the outdoors. SEC v. Melson, Civil Action No. 1:23-cv-10060 S.D.N.Y. Filed November 15, 2023).
Defendant Matthew Melton was a resident of Puerto Rico in 2018 when the scheme at the center of the case began. He had formed an entity named Price Physics in May 2017. Mr. Melton relocated to Colorado in 2018.
Over a period of about two and one half years, beginning in April, 2018, Defendant Melton targeted those who shared an affinity for the outdoors, soliciting them to purchase securities in his firm, Price Physics.
Investors were told that Mr. Melton would invest their funds in stock index futures using a trading algorithm of Price Physics. The trading, investors were told, could be expected to generate consistent returns of 12% per month.
To profit from the trading scheme, investors agreed to execute either a “loan agreement” or a “promissory note.” Each constituted a security. The funds obtained from the investors were sent directly to Defendant’s personal bank accounts and comingled with other investor funds.
Defendant Melton did not invest the funds obtained from investors as promised. To the contrary, about $1.5 million of the $3.4 the investor funds was misappropriated and either used to pay personal expenses of Defendant or for Ponzi like payments. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is in litigation. A parallel criminal action has been filed by the U.S. Attorney’s Office for the Southern District of New York. See Lit. Rel. No. 25893 (November 15, 2023).
Affinity Scheme Tied to the OutDoors
Offering fraud actions frequently are the largest group of cases filed by the Commission during any period or, if not the largest group, at least one of the largest groups. Within that group of cases are those which are based on targeting a particular group, frequently one to which the implementer of the scheme belongs. Over the years there have been schemes based on race, religion and a host of similar identifiable subgroups. The latest group may, however, plow new ground – it is composed of those with an affinity for the outdoors. SEC v. Melson, Civil Action No. 1:23-cv-10060 S.D.N.Y. Filed November 15, 2023).
Defendant Matthew Melton was a resident of Puerto Rico in 2018 when the scheme at the center of the case began. He had formed an entity named Price Physics in May 2017. Mr. Melton relocated to Colorado in 2018.
Over a period of about two and one half years, beginning in April, 2018, Defendant Melton targeted those who shared an affinity for the outdoors, soliciting them to purchase securities in his firm, Price Physics.
Investors were told that Mr. Melton would invest their funds in stock index futures using a trading algorithm of Price Physics. The trading, investors were told, could be expected to generate consistent returns of 12% per month.
To profit from the trading scheme, investors agreed to execute either a “loan agreement” or a “promissory note.” Each constituted a security. The funds obtained from the investors were sent directly to Defendant’s personal bank accounts and comingled with other investor funds.
Defendant Melton did not invest the funds obtained from investors as promised. To the contrary, about $1.5 million of the $3.4 the investor funds was misappropriated and either used to pay personal expenses of Defendant or for Ponzi like payments. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is in litigation. A parallel criminal action has been filed by the U.S. Attorney’s Office for the Southern District of New York. See Lit. Rel. No. 25893 (November 15, 2023).