The Securities and Exchange Commission (SEC) has filed an emergency enforcement action and managed to obtain a temporary retraining order and asset freeze against a company founder and his firm.
Kenneth Courtright and his business, Today’s Growth Consultant (TGC), have been linked to an alleged Ponzi-style scheme which operated at least between 2017 and 2019, the SEC said.
The regulator said TGC and Courtright managed to con over 500 investors, based both in the US and abroad, out of at least $75m (£57.6m, €67.3m).
Massively unrealist returns
Victims were asked to pay an upfront fee, with TGC claiming it would buy or build a website as well as develop, market and maintain it for the investor.
The scheme, called ‘The Income Store’, promised investors the larger of either 50% of their website revenues or a minimum guaranteed return; typically ranging from 13% to 20% of the initial investment amount to be paid monthly.
This was to be the case even if the website ‘s revenue, which was derived from unspecified product sales and advertising, was insufficient to pay the return.
From 1 January 2017 until at least 31 October 2019, investor websites generated approximately $9m in advertising and product sales revenue.
During that period, TGC payed investors at least $30m.
Ponzi business model
The SEC said the firm falsely promised that funds raised would have been used solely for the expenses related to such websites.
Instead, it alleges that the sales were conducted through unregistered securities offerings and the money was used to pay investors’ returns – in a Ponzi-like way – and for Courtright’s personal expenses, including a mortgage and private school fees for his family.
“TGC and Courtright’s alleged fraud promised a guaranteed return when the company’s business model and financial condition could not possibly support it,” said Antonia Chion, associate director in the SEC’s division of enforcement.
“To avoid further harm to investors and preserve the misused assets that have not already been dissipated, we have sought and obtained emergency relief.”
Both the founder and his company have been charged with violation of the anti-fraud and registration provisions of the federal securities laws, as well as other civil penalties.
The SEC added it is seeking to obtain emergency relief as well as permanent injunctions and to return “ill-gotten gains with pre-judgement interest”.
