Securities Lawyers Blog
The attorneys at Gana Weinstein LLP are looking into potential actions to help investors ensnared in the 1st Global Capital LLC (1st Global Capital) investment fraud scheme. As revealed in court documents and the complaint filed by The Securities and Exchange Commission’s (SEC) – 1st Global Capital engaged in a four year unregistered securities offering overseen by Carl Ruderman (Ruderman) – also charged. The SEC has alleged that more than 3,400 investors nationwide have been caught in the company’s $287 million fraud.
The SEC alleged that 1st Global Capital deceived investors through its offerings of short-term financing to small and medium-sized businesses. 1st Global Capital used a network of barred brokers, registered and unregistered investment advisers, and other sales agents paying them millions in commissions to sell unregistered and fraudulent securities in no fewer than 25 states. The Company and their agents allegedly promised investors high-returns and a low-risk investment in which investor money is used to make short-term cash advances called Merchant Cash Advances (MCAs) to businesses that could not obtain more traditional financing.
As in many frauds, the SEC alleged that 1st Global Capital used substantial investor funds for purposes other than the cash advances including misappropriated at least $35 million of investor money from which at least $28 million went directly to Ruderman and other entities he owned or controlled. Other alleged illegitimate uses include paying operating expenses and purchasing already-distressed, longterm credit card debt. As a result, by October 2017 1st Global Capital experienced a shortage of investor funds of $23 million which increased to about $50 million by June 30, 2018.
After the writing was on the wall Ruderman resigned from 1st Global Capital in July after the company declared bankruptcy.