It is often difficult to determine if an investment opportunity is genuine. Those involved in fraudulent conduct are frequently skillful in crafting schemes which appear to be genuine investment opportunities when they are not. Consider, for example, the Commission’s latest offering fraud scheme. There potential investors were furnished a document signed by accounting giant KPMG LLP. They were given attorney letters from well-known law firm K&L Gates that supported representations used by those soliciting investments. Yet all was fraudulent. SEC v. Ridall, Civil Action No. 1:23-cv-20200 (S.D. Fla. Filed under seal January 18, 2023).
Named as defendants in the action are: Jack Ridall and his firm, Guss Capital. Beginning in December 2020, Defendants raised at least $750,000 from four investors. The funds were supposedly invested through Mr. Ridall’s firm, an unregistered investment adviser.
Beginning in late 2020 Defendants touted Mr. Ridall and Guss Capital as experienced fund managers. The firm was supposed to be an “equity long-short investment management company, according to its website www.guscap.com. Defendants claimed their portfolio used “correlated market neutral spreads” to secure returns above 20% with minimal risk.
Mr. Ridall had deep experience according to the statement made to investors. His experience was touted through family connections. Defendant Ridall told one investor he would waive the standard fee because the investor was “like an uncle” to him. Investor funds were supposed to be put into “blue chip stocks” and a planned hedge fund.
To take advantage of the offered investment opportunity, investors executed a subscription agreement. Under the agreement they became part of Defendants’ Guss Actium Fund. After being reassured about the stellar returns earned by prior investors, their funds were deposited in the personal bank account of Mr. Ridall. For example, Mr. Ridall convinced one investor, a childhood friend of his mother who is a single mother, to empty her 401(k) and invest all of her money with him. Mother’s friend was assured that the returns would be so large they would more than pay for the early withdrawal penalty she faced for taking all of her funds out of the account.
Investors were assured not just by Mr. Ridall but the documents he furnished. Those included a statement from KPMG touting the success of one prior investor. The statement claimed that the investor return was 81%. Later, to again assure investors, letters from international law firm K&L Gates were produced to investors touting the spectacular investment returns obtained by Mr. Ridall.
In fact, the KPMG documents were fabricated. The K&L Gates letters were fraudulent. The money had never been invested. The claimed investment history of Mr. Ridall was a lie. The complaint alleges violations of each subdivision of Securities Act Section 17(a), Exchange Act Section 10(b), and Advisers Act Sections 206(1), 206(2) and 206(4). The complaint is pending.