A former advisor and convicted felon has agreed to pay $221,000 to settle SEC charges he fraudulently persuaded investors to put $100 million in an investment that turned out to be a Ponzi scheme.
From April through October 2009, Barry R. Bekkedam, former owner and CEO of the defunct Ballamor Capital Management, solicited his clients and others to invest in a fund that purportedly purchased lawsuit settlements from Scott Rothstein, an attorney who was later convicted and sentenced to 50 years for the scheme, according to the SEC complaint,.
Under the terms of the settlement, which is subject to court approval, Bekkedam agreed to be permanently enjoined from violating federal antifraud, the SEC said. He also was ordered to pay disgorgement of $150,000 plus prejudgment interest in the amount of $70,969.
Bekkedam, of Radnor, Pa., was convicted in a related criminal case and sentenced in January 2017 to a prison term of 11 months followed by three years of supervised release and ordered to pay a fine in the amount of $100,000.
Beginning in 2005, Rothstein falsely claimed that some of his clients – plaintiffs who had reached confidential settlements in sexual harassment, whistleblower and qui tam actions against large corporate defendants – were willing to assign the full amount of their periodic settlement payments in exchange for immediate, but discounted, lump sum cash payments, the complaint said. He allegedly promised investors they would reap rewards when the cases were settled.
In early 2009, Bekkedam was approached by George Levin to help solicit investments to purchase Rothstein settlements, the complaint said. Levin, the complaint said, had already invested millions in the Rothstein settlements, both individually and through entities that he controlled, and these investments were at risk if Levin could not find additional investors. In April 2009, Levin and Bekkedam, among others, formed the Banyon Income Fund LP for the purpose of investing in Rothstein’s purported settlements, the complaint said. Levin controlled the general partner of the Banyon Fund and Ballamor served as the limited partner representative.
The complaint alleged, among other things, that Bekkedam misrepresented the level of due diligence that he had performed on the investment, including falsely stating that he accessed information confirming the existence of the settlement funds, the authenticity of Rothstein’s investment program and the overall safety of investing in the Rothstein settlements, the complaint said.
Despite lacking essential information regarding Banyon Fund’s investments in the Rothstein settlements, Bekkedam continued to solicit investments from advisory clients and other investors, the complaint said. He also concealed from his advisory clients and other prospective investors the nature of his relationship with Levin and the clear conflicts of interest resulting from the financial arrangement between Levin and Bekkedam and his affiliates, the complaint said.
Until the time the Ponzi scheme collapsed in October 2009, Bekkedam continued to make material misstatements and omissions to his advisory clients and other prospective investors to induce them to invest in the Banyon Fund, the SEC said. At the time, Banyon investors had received about $2 milion in interest payments, with their principal investment lost in the Ponzi scheme, the complaint said.