Meyer Wilson | Investor Claims In the News
SEC Freezes Assets of Two Chicago Firms For Fraudulent Activity
Posted on Nov 09, 2010
Last week, the SEC obtained an emergency court order and froze the assets of two Chicago investment firms. The two companies, Brewer Financial Services LLC and Brewer Investment Advisors LLC, have been accused of participating in a fraudulent offering of promissory notes and of using investor funds to subsidize their own failing companies.
According to an Oct. 29 SEC Litigation Release, the Commission has charged that from mid 2009 through the end of September 2010, the firms' owners, Steven Brewer and Adam Erickson, raised approximately $5.6 million from 74 investors by offering investments in promissory notes. The notes were issued by an Isle of Man company, and investors were told: "their money would be used to repay certain debts of the issuer's parent company, and thereby release assets that would be used to secure their promissory note obligations."
The SEC has also charged that instead of investing the funds in the manner represented in the offering materials, Brewer and Erickson disbursed 90 percent of the funds raised to the firms' parent company, Brewer Investment Group, and its subsidiaries, all of which were in financial trouble. In addition to misrepresentations of how the funds would be used, Brewer and Erickson allegedly also misrepresented the risk level associated with the investment and failed to disclose the true financial health of the companies to investors.
Donald Hoerl, director of the SEC's Denver office, said: "Brewer and Erickson raised substantial funds to capitalize their own struggling business operations while leading unsuspecting investors to believe their investments would be secured by collateral. They went so far as to continue selling promissory notes to new investors even after they discontinued making interest payments to earlier investors."
In addition to the preliminary injunction against Brewer, Erickson, the two Chicago firms, and the parent company BIG granted by the Honorable Blanche M. Manning in the U.S. District Court in Chicago, the SEC has also requested permanent injunctions, disgorgement plus pre-judgment interest, and financial penalties against all of the defendants.
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