The Securities and Exchange Commission has charged a Michigan stockbroker with fraud, alleging that he lured hundreds of elderly investors into a $250 million Ponzi scheme after convincing many of them to refinance their home mortgages.

The SEC alleges that 59-year-old Frank Bluestein, a Detroit-area stockbroker, acted as the single largest salesperson in the Ponzi scheme operated by Edward May and his company, E-M Management Company LLC. The SEC previously filed charges against May and E-M in connection with the fraudulent scheme.

David M. Foster, Bluestein's attorney, was unavailable today for comment on the charges. However, in an article in the Wall Street Journal, Foster said Bluestein didn't know anything was wrong with the E-M securities he was selling and has lost $1 million of his own money by investing in them.

The SEC alleges that Bluestein specifically targeted potential investors who were retired or elderly and conducted so-called "investment seminars" in Michigan and California to lure them into investing in E-M securities.

The SEC's complaint, filed in the U.S. District Court for the Eastern District of Michigan, alleges that Bluestein facilitated May's fraudulent scheme by raising approximately $74 million from more than 800 investors through the sale of E-M securities over five years. Bluestein, through his company Maximum Financial, conducted investment seminars to find new E-M investors.

Bluestein was very methodical and careful not to discuss the E-M offerings openly during these "seminars" in a way that would alert attendees to the fact that they were actually forums to pitch the E-M offerings, the SEC's complaint says. Bluestein first gained the trust of potential investors who attended by discussing generic financial planning topics and other investment products. But under the guise of informal conversations, Bluestein would generate talks among attendees who already had invested in E-M offerings. For instance, Bluestein would often ask if they had "received their Ed May checks?" or "How do you like those Ed Mays?" in order to drum up discussion of the investments and attract the interest of other potential investors attending the seminars.

The SEC's complaint alleges that Bluestein misrepresented to investors that the investments were low-risk and that he had conducted adequate due diligence on them, but he actually did little to investigate the E-M offerings even when confronted with serious red flags about some transactions. Bluestein also misled investors by failing to disclose that he received at least $2.4 million in commissions from May and E-M in addition to the $1.4 million in disclosed compensation he received from investor funds.