SEC Targets Prime Bank Schemes

By Francis Laryea, Spring 2015 Student Intern

On January 23, 2015, the SEC filed a cease and desist order against Spectrum Concepts, LLC, Donald Worswick, Michael Grosso and Michael Brown.  The order alleges that Spectrum was involved in a prime bank scheme. Worswick, the president of Spectrum was allegedly aided by Grosso and Brown. Prime bank schemes are becoming common, and investors should be careful if one is pitched to them. 

According to the SEC in a recent Investor Alert, “All ‘prime bank’ investment programs are fraudulent.”  Fraudsters allege that these instruments are being issued by the world’s top banks. That is why this type of fraud is referred to as “prime bank” investment fraud. The promoters of these investors tell clients that they have access to markets or programs normally reserved for the Wall Street elite. They promise that these investments will generate large returns for the investors without any risk.  These instruments and the markets on which they are allegedly supposed to trade do not exist.

Promoters of such investments advertise on very respectable platforms such as the Wall Street Journal or USA Today, giving them an air of credibility. Excessive or guaranteed returns, like promised returns in the range of 20-200% monthly, should put an investor on notice that it might be a prime bank related fraud. Extreme secrecy and “exclusive opportunities” are terms that should also alert investors to possible fraudulent activity.  If a promoter attempts to explain away your questions by claiming that the answers are very complex and will be difficult for you to understand, you should increase your vigilance.

For additional information on the prevention and detection of prime bank fraud, check out this SEC investor alert.