The Securities and Exchange Commission Tuesday obtained an emergency court order to freeze the assets of a North Texas resident and his company who falsely promised investors they would receive fat returns from distressed mortgage loans.

The SEC alleges that James G. "Jay" Temme, 42, of Plano, Texas, and his company Stewardship Fund LP raised $35 million from 16 investors since 2008. Instead of investing the funds in mortgages and properties, Temme used them to pay off other investors, according to the SEC lawsuit.

To lure investors, Temme developed relationships with people and entities who "vouched" for Temme, including an investment advisor representative with a major investment bank's private wealth management group and a Texas-based public company that provides mortgage restructuring services.

Investors and their advisors, including the bank IAR, were told by Temme that he was using the investors' money to purchase "tapes" of nonperforming mortgages from mortgage lenders at a discount and then paying returns based on principal and interest payments he collected from the homeowners, or based on the resale of the mortgages or underlying properties.

However, the SEC says in several instances Temme claimed to own mortgages he had never acquired or he claimed he transferred the same pool of mortgages to multiple sets of investors. To carry out his scheme, Temme created false documents, made unauthorized financial transactions, and used new investor funds to pay off earlier investors.

"Temme took advantage of investors who believed their investments were helping homeowners restructure their mortgages," said David Woodcock, director of the SEC's Fort Worth Regional Office. "In many instances, it appears Temme was just pocketing the investments and using the proceeds for his own illicit purposes."

According to the SEC's complaint filed in federal court in the Eastern District of Texas, Temme has been the subject of at least one state court asset freeze and various private lawsuits by different investor groups. However, rather than stopping his scheme, Temme ignored the asset freezes, opened new bank accounts, and raised money from new investors to settle suits filed by earlier investors.

Tthe SEC also is seeking a preliminary injunction and a final judgment permanently enjoining the defendants from future violations of the relevant provisions of the federal securities laws and ordering them to pay financial penalties and disgorgement of ill-gotten gains with prejudgment interest.

The case is assigned to U.S. District Judge Michael H. Schneider. The court has scheduled a hearing on the Commission's motions to appoint a receiver and for a preliminary injunction for Thursday, Oct. 27, at 2 p.m. before U.S. Magistrate Judge Amos L. Mazzant at the U.S. Courthouse in Sherman, Texas.

The SEC investigation of Temme is continuing.