SEC Fraud Case Cites Spokane Man’s JOBS Act Pitch to InvestorsJoshua Gallu
A Spokane, Washington man sued for defrauding investors used the 2012 Jumpstart Our Businesses Act to tout his plan to raise billions of dollars in capital, according to the U.S. Securities and Exchange Commission.
Daniel F. Peterson and his firm USA Real Estate Fund 1 Inc. raised about $400,000 from more than 20 investors, some of which he spent on personal expenses, the SEC said today in a complaint filed at federal court in Spokane. Peterson denied the SEC’s allegations.
According to the SEC, Peterson told his clients that a JOBS Act provision allowing investments to be advertised to the general public would help him raise billions of dollars to invest in U.S. businesses. He claimed investors stood to reap returns as much as 1,300 percent over 10 years, the SEC said.
“We’ve brought this court action to stop Peterson’s fraud in its tracks before it picks up more steam,” Michael Dicke, associate director of the SEC’s San Francisco office, said in a statement. “The JOBS Act is intended to help small businesses raise capital, not to legalize fraud or give unscrupulous entrepreneurs a right to make false claims.”
Peterson, who was accused by the SEC of using investor funds to pay his rent and finance entertainment and vacations, sent letters last year to several U.S. lawmakers and then-SEC Chairman Mary Schapiro pushing for general solicitation in a class of securities he said would assure return of investors’ principal, according to letters posted on the SEC’s website.
In a telephone interview, Peterson said the friends and family members who invested with him understood they were providing operational capital for the company and that some funds would be used to recoup losses he had already incurred. He also said he had filed for an unregistered offering in 2010.
The SEC is considering rules on so-called general solicitation that would let hedge funds advertise investments to the public. While Republican lawmakers have urged the agency to pass the rules, investor advocates say they might increase the threat of investor fraud.
“Nobody was misled,” Peterson said in a telephone interview. “None of them want their money back. They want the SEC to finish the JOBS Act.”