Midge's Nephew involved in Ponzi Scheme
SEC Shuts Down Alleged Ponzi Operating Through Estate Planning Seminars
Would you spend your entire nest egg on a lunch? If you attend an estate planning seminar or a wealth management seminar
offering a free meal in exchange for your attention, you may wind up doing just that. This week, the U.S. Securities and Exchange
Commission charged two men with making that trade with investors. The SEC obtained an emergency injunction shutting down
USA Retirement Management Services operated by Francois E. Durmaz and Robert C. Pribilski, neither of whom holds any kind of
license from the SEC. According to the SEC’s complaint:
USA Retirement Management Services (“USARMS”) and managing partners Francois E. Durmaz and Robert C. Pribilski mass-
mailed promotional materials to prospective investors and invited them to estate planning seminars held at country clubs and
banquet halls. They gained retirees’ confidence in follow-up meetings and portrayed themselves as educated and experienced in
foreign investments specifically tailored to the needs of seniors. Durmaz and Pribilski then pitched what they represented as safe,
guaranteed investments in “Turkish Eurobonds” through the purchase of USARMS promissory notes that would earn annual returns
between 8 and 11 percent.
The SEC alleges that USARMS raised at least $20 million from more than 120 investors, but did not actually invest the money in
Turkish Eurobonds as promised. Instead, returns were paid to earlier investors with funds received from new investors in Ponzi-like
fashion. Durmaz and Pribilski further misused investor funds to finance their other businesses and purchase such things as luxury
automobiles, homes, vacations, and web-based pornography. They also wired investor money into bank accounts belonging to
individuals living in Turkey who are named as relief defendants in the SEC’s case.
Notice four things about this case. First, notice the invitation to attend a seminar. Investor thinking about seminars often goes
something like this: ”I’ll get a free meal and make no commitments. What could happen?” What happens is that the seminar is so
persuasive that you agree to a one-on-one meeting with the hosts of the seminar. That is like an antelope agreeing to be separated
from the herd in lion country.
Second, notice that this investment involved promissory notes. As we have posted about recently, we are seeing a vast increase in
the number of schemes involving promissory notes, which give investors comfort because of their contractual terms and supposed
payment of interest.
Third, notice the sale of supposed European instruments. Scam artists often purport to sell European instruments because they
seem sophisticated and allow the scam artists to answer questions with little chance that the investor will know enough about
European markets to confirm the accuracy of the answers.
Finally, notice that the defendant promised returns of between eight and 11 percent. Madoff taught scamsters to promise rates more
within the realm of possibility.
Notice also that 120 senior citizens have lost everything they worked and saved for. It might have been your parents. It might have
been you. All of the victims thought that they could evaluate the “opportunity” without help. Smart investors appreciate their
vulnerability and take sensible precautions.