The Securities and Exchange Commission has charged an unregistered investment advisor and convicted felon with offering and selling securities related to investments in a fake fund and misappropriating a large portion of the $5 million the fund raised.
The advisor, Terrence Chalk, 58, of Passaic, N.J., and Orlando Fla., also faced criminal charges filed in a parallel action by the U.S. Attorney's Office for the Southern District of New York.
The SEC complaint said that from at least 2017 through 2020, Chalk recommended, offered and sold securities related to investments in a fictitious “Chairman’s Fund” to his advisory clients and others. Chalk marketed investments in this purported fund using the brand name “Greenlight,” which he described as a family of several companies that provided financial coaching services to “ordinary 9-to-5 working professionals who seek relief from the Rat Race.”
The complaint alleged that Chalk, who was previously convicted of identity theft and bank fraud, used the alias "Dr. Terrence Cash" to conceal his identity and criminal past from investors and billed himself as a “seasoned entrepreneur, accredited private investor, coach, author and philanthropist with over 25 years of experience and success in business.” He also told investors that he was the chairman and founder of a network of Greenlight entities.
Chalk, the complaint said, falsely marketed the Chairman’s Fund as an elite fund of funds that provided an exclusive investment opportunity delivering quarterly cash dividends averaging between 12% and 77% per year, and no less than 12% per year. He advised his clients to transfer their existing retirement accounts and other savings to newly established accounts at a self-directed IRA custodian to invest in the fictitious fund.
The SEC said Chalk and the Greenlight issuers sold investments in the fund to about 40 investors, raising approximately $5 million. Most of his clients were retirees, including former civil servants. Only a fraction of the investors’ money was invested in a handful of unprofitable business ventures, the SEC said, adding that Chalk and the Greenlight entities withdrew almost $1 million of investors’ money in the form of cash and wire transfers, and used more than $700,000 on Chalk’s personal expenses, including luxury car payments, credit card bills, jewelry purchases and the installation of a swimming pool at his home.
Chalk and the Greenlight entities also used about $1.8 million of investor money to make purported dividend payments to prior investors in Ponzi-like fashion, the complaint said.
The SEC also noted Chalk’s criminal history. Around the year 2001, Chalk was the founder and owner of Compulinx Managed Services Inc., a White Plains, N.Y.-based computer systems company, and a related web of companies, many of which were branded under the Compulinx name. The company suffered financial difficulties and sought loans, submitting applications with false representations that certain of his employees and clients were guarantors or were owners and officers of Chalk’s various business entities. These applications included the employees’ or clients’ personal identification information without their knowledge or permission. Chalk even included the name and personal information of a dead relative, the complaint said.
Chalk was arrested and charged for this misconduct by the U.S. Attorney’s Office for the Southern District of New York in October 2006. He pleaded guilty to conspiracy to make false statements to financial institutions and aggravated identity theft and was sentenced to 76 months in prison. He was released in September 2012 and freed from probation in September 2015.
The SEC's 2020 complaint, filed in U.S. District Court for the Southern District of New York, charges Chalk, Greenlight Business Solutions Inc., Greenlight Consulting Corp., Greenlight Advantage Group Inc. and Greenlight Investment Partners Inc. with violations of the antifraud provisions of the Securities Exchange Act and Investment Advisers Act of 1940, and seeks injunctive relief, civil penalties and disgorgement of ill-gotten gains plus prejudgment interest.