CHS promised investors it would donate a portion of each investor’s profits to their choice of charities, which never happened, the SEC said.
Whitney assured investors they would only lose money in the event of a “nuclear war.” CHS also assured investors that they would have access to their money for major purchases, such as cars and vacations.
CHS told investors it was not a Ponzi scheme, but was managed by Wall Street investors, audited by KPMG, and is a “well-run company that brings big returns” to its investors.
In reality, the vast majority of funds were misappropriated by the defendants, who enriched themselves and paid their personal expenses and made Ponzi payments to investors—satisfying investors’ liquidation requests with recent deposits from new investors.
There is no evidence of any underlying investment vehicle as defendants promised investors, the SEC said.
The Honorable Judge James V. Selna of the U.S. District Court for the Central District of California granted the SEC's request for a temporary restraining order and asset freeze on March 14.