The Securities and Exchange Commission has obtained a federal court order to freeze the accounts of what it said were two phony companies involved in a pyramid scheme using social media, the agency announced Wednesday.
The companies, Fleet Mutual Wealth Limited and MWF Financial, known collectively as Mutual Wealth, masqueraded as a legitimate international investment firm, said the SEC, which obtained an emergency enforcement action to stop them. The accounts holding the money have been frozen by the U.S. District Court for the Southern District of California.
Mutual Wealth has been luring investors through a Web site and social media accounts on Facebook and Twitter, falsely promising extraordinary returns of 2 percent to 3 percent per week for investors who open accounts with the firm, the SEC said.
Mutual Wealth said it invested customer funds in an innovative, high-frequency trading strategy that allows capital to be invested into securities for no more than a few minutes. The company encourages existing investors to become accredited advisors and recruit new investors in exchange for a referral fee or commission—a classic pyramid scheme strategy, the SEC alleges.
According to the commission’s complaint, almost nothing that Mutual Wealth represents to investors is true. The company does not purchase or sell securities on behalf of investors but merely diverts investor money to offshore bank accounts held by shell companies. Mutual Wealth’s purported headquarters in Hong Kong does not exist, nor does its supposed data center in New York. Approximately 150 U.S. investors opened accounts with Mutual Wealth, investing a total of at least $300,000.
“Mutual Wealth used Facebook and Twitter as well as a team of recruiters to spread a steady stream of lies that tricked investors out of their money,” said Gerald W. Hodgkins, an associate director in the SEC’s Division of Enforcement.
According to the SEC’s complaint, Mutual Wealth operates through entities in Panama and the United Kingdom and uses offshore bank accounts in Cyprus and Latvia. The SEC investigation is continuing.