The Securities and Exchange Commission has filed civil charges against a Richmond, Va.-based advisor, accusing him and his companies of orchestrating a $7.7 million offering fraud and Ponzi scheme.
The complaint alleges that from at least January 2006 to November 2009, advisor Nicholas D. Skaltsounis directly, and through his registered reps, fraudulently offered and sold promissory notes and stock to at least 74 investors in at least 14 states. Many of those who bought the fraudulent investments were elderly and unsophisticated investors, according to the SEC. Skaltsounis, 66, and at least one other defendant, are seniors themselves, according to the complaint.
Skaltsounis is CEO and president of AIC Inc., a financial services holding company for three broker-dealers and an investment advisor that were all involved in the scheme.
Also named in the complaint are AIC's subsidiary, Community Bankers Securities LLC (CB Securities), a broker-dealer, along with associated stockbrokers John B. Guyette, 70, of Greeley, Colo., and John R. Graves, 51, of Pensacola, Fla., who was also an investment advisor. AIC's three subsidiary broker-dealers-Allied Beacon Partners Inc., Advent Securities Inc. and CBS Advisors LLC-were also named. The complaint was filed in U.S. District Court for the Eastern District of Tennessee.
Skaltsounis, Guyette and Graves failed to inform investors about the safety and risk associated with the AIC promissory notes and stock, the rates of return on the investments, and how AIC would use the proceeds of the investments, the SEC alleges in the complaint.
As part of the Ponzi scheme, according to the complaint, about $2.5 million of new investor money was distributed back to investors. Skaltsounis also used investor money to pay himself $952,258 in salary, advances, loans, interest and dividends, according to the SEC. Also, about $3,629,282 was used to keep the subsidiary broker-dealers solvent and to allow them to meet "net capital" requirements, according to the SEC.
The complaint also alleges that AIC promised to pay interest and dividends ranging from 9% to 12.5% on the promissory notes and stock knowing that it did not have the ability to pay those returns. AIC and its subsidiaries were never profitable, according to the SEC, and AIC earned de minimis revenue and its subsidiaries did not earn sufficient revenue to meet its expenses. Skaltsounis used the money raised from new investors to pay back principal and returns to existing investors in the nature of a Ponzi scheme, the SEC said. By early December 2009, Skaltsounis' scheme collapsed when he could no longer solicit investments and recruit new investors to pay back existing investors.