In the string of investment fund fraud cases the Commission has brought since the arrest of Ponzi king Bernard Madoff, enforcement officials typically do not arrive in time to save investors from losing their money. Despite diligent efforts, law enforcement typically arrives on the scene after investors have given the fraudster millions of dollars based on a pitch focused on guaranteed safety and fabulous returns from some proprietary trading or investment system. Much, if not all of the money investors entrusted to the fraudster is gone. Investors are lucky to recover pennies on the dollar. This is just the way these schemes unfold.

In the recent case involving Uche Akwuba and his investment advisory firm Hanes Morgan & Co. however, it appears that the Commission arrived in time to save investors. The man behind Hanes Morgan, which did business as Mega Trakker Endowments, is a convicted fraudster who served 46 months in prison and three years on probation after being convicted of wire fraud and other charges. He has also been fined and barred from association with any member of the NASD.

Nevertheless, from July 29 to November 29, 2010 Hanes Morgan operated as a registered investment adviser. The firm solicited possible clients through its website. There investors were told that the firm owned trading platforms located in major American banks. It also had a staff of professional stock traders, according to the site. ChenTrack, a scientific trading system used by the firm, was consistently successful, enabling it to deliver guaranteed growth of 10% per year, compounded. The system had been created by a brilliant mathematician and had been market tested. Would be investors were invited to open a “Wall Street Savings Account” with a minimum initial investment of $2,150. No doubt more could be invested.

The Commission’s Order Instituting Proceedings, which names the firm and its principle as Respondents, alleges that the representations on the website are false. There are no trading platforms at major banks. ChenTrak is not a sure fire system developed by a brilliant mathematician. Rather, it is Mr. Akwuba’s intuition. The system had not been tested. There were trading results however. Respondents’ created a dummy account, selected stocks Mr. Akwuba claims he would have selected and, with backdated results, achieved positive returns. Somehow the website failed to disclose these facts or mention Mr. Akwuba’s prior encounters with law enforcement.

The Commission instituted a proceeding against the firm and its principle. The Order does not allege that the Respondents were successful in soliciting investor money or using it for their own benefit as in most investment fund fraud cases. It does allege violations of Advisers Act Sections 206(1), 206(2) and 205(4). Respondents resolved the proceeding by consenting to the entry of a cease and desist order based on the sections cited in the Order. Respondent Akwuba also agreed to be barred from the securities business. Each Respondent will pay a civil money penalty of $100,000. In the Matter of Hanes Morgan & Co., Adm. Proc. File No. 3-14649 (Nov. 29, 2011).

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