Law360, Miami (August 26, 2014, 4:04 PM ET) — An investment manager accused of defrauding investors by contributing millions to now-imprisoned Scott Rothstein’s $1.2 billion Ponzi scheme on Monday decried the U.S. Securities and Exchange Commission’s suit against him and said he was the primary target and the biggest victim of the scheme. In a response to the SEC’s motion for summary judgment, George Levin called the suit an “overzealous, desperate crusade” and accused the agency of submitting a perjured declaration to the court and manipulating a witness declaration.
Levin says that he was completely unaware of the fraudulent scheme and that on its collapse, he lost most of his $200 million fortune. “The SEC’s motion for summary judgment illustrates the amazing lengths to which the agency will go to obtain its headline-grabbing, desired result,” Levin said. The SEC alleges that Levin and fellow investment manager Frank Preve raised $157 million from 173 investors by selling unregistered securities based on Rothstein’s sham legal settlements, which their investment literature purported to have verified.
Between 2005 and October 2009, Rothstein operated the $1.2 billion scheme by telling prospective investors and lenders that certain clients at his now-defunct firm Rothstein Rosenfeldt Adler PA had reached large settlements, according to court records. Because some of the clients supposedly needed quick cash, Rothstein worked out deals with the investors under which they would pay the fake settlements at a steep discount to the plaintiffs, and then receive the total settlements themselves over time, according to court documents.
The SEC says Levin and Preve purchased these supposed settlements and resold them as securities in the form of promissory notes from Levin’s company, Banyon 1030-32 LLC, or later as interests in their private investment fund, Banyon Income Fund LLP. Although the pair advertised that they had safeguards in place to protect investor money, the SEC contends, they often purchased settlements without any legal documents or taking any steps to verify that funds from the supposed settlements were actually in Rothstein’s bank accounts. Levin and Preve were involved in drafting the offering materials for both entities, the SEC asserts, and the information they provided investors contained misrepresentations and omissions.
Preve pled guilty earlier this month to a criminal charge of conspiracy to commit wire fraud and is set to be sentenced Dec. 12. Levin and his wife agreed in September 2011 to settle an adversary suit brought RRA’s bankruptcy trustee by promising to pay at least $10 million. Rothstein, who pled guilty in January 2010 to five counts, including racketeering and fraud, is serving a 50-year prison sentence.
Levin is represented by William L. Richey PA.
The SEC is represented by Amie Riggle Berlin.
The case is the U.S. Securities and Exchange Commission v. Levin et al., case number 1:12-cv-21917, in the U.S. District Court for the Southern District of Florida.