"Although many investors did not understand the investment, they ultimately trusted Smith and took comfort in the fact that a high-profile pastor was offering the investment," the SEC said in a civil complaint filed in U.S. District Court in Shreveport.
Instead of reselling the bonds, Caldwell and Smith used much of the money for themselves, according to the SEC. Caldwell and Smith pocketed $1 million and $760,000, while a company controlled by Caldwell received about $1 million, the SEC said. The remainder of the investor funds went to offshore third parties, including at least one in Mexico, according to the SEC.
Caldwell used the money for his mortgage payments, while Smith used the investors' money to buy luxury automobiles, the SEC said.
Throughout 2014, as investors were increasingly complaining about not getting a return on their investments, Caldwell and Smith continually fielded calls and sent out "lulling" emails that contained false assurances that the bonds would be sold, the SEC contended in its complaint.
Caldwell repeatedly told investors to "remain faithful" that they would receive their money, but the bonds were never sold, the SEC alleged.
"No investor to date ever received any return on his or her investment," the SEC said in its complaint. "The great majority of investors have never even received their principal back."
In his TV interview, Caldwell contended that, "To date, everyone who has asked for a refund has received a refund in full."
A third party to the alleged scheme, attorney Shae Yatta Harper of Monmouth Junction, N.J., was also sued by the SEC for drafting the bond purchase agreements and overseeing the banks accounts used by Caldwell and Smith in the scheme, according to the SEC. Accused of aiding and abetting the fraud, Harper agreed to a settlement in which she neither admitted to nor denied the allegations. She agreed to pay a $60,000 penalty and to being suspended from acting as an attorney before the SEC, with the right to request reinstatement after five years, according to the SEC.
If convicted of the criminal charges, Caldwell and Smith each face 20 years in prison for the wire fraud charges, 10 years for money laundering and $1 million in penalties, according to the U.S. Attorney's Office in Shreveport.