SEC Files Complaint Against Alleged Ponzi-Scheme Fraudster

By: Jason Robinson, Summer 2015 Graduate Research Assistant

The SEC recently filed a complaint concerning a Miami-based Ponzi scheme.  In 2007, Phil Williamson allegedly began to recruit investors for an investment fund called the Sterling Fund. Mr. Williamson allegedly told potential investors that there was no risk involved and that the investment would return 8-12% annually. Many of the investors in the Sterling Fund were public sector retirees who had limited experience with investing. A former police chief, two prison corrections officers and a school principal were some of the victims of Mr. Williamson’s alleged Ponzi scheme.

According to the SEC, these vulnerable investors agreed to rollover their retirement accounts to a third party IRA custodian who would then purchase interests in the Sterling Fund. The investors did not realize that they were authorizing Mr. Williamson to deduct advisory fees and giving him full control over their accounts. Mr. Williamson allegedly would provide investors with fabricated account statements. For example, the SEC claims one investor received a statement which said that her account was valued at $221,048.37, when in reality the victim’s account had a balance of $583.00.

Allegedly, the Sterling Fund did not make any significant profits, but Mr. Williamson maintained the appearance of profitability by paying out investor funds and calling them profits (Ponzi scheme). The SEC reports that investigators were able to unravel the scheme by looking into Mr. Williamson’s bank records. On one day a pastor and retired teacher invested $125,000 in the fund. On that same day Mr. Williamson transferred $10,000 to himself which he then used to make a car payment, pay his children’s tuition, and pay off a credit card bill. The SEC demonstrated a similar pattern of behavior in Mr. Williamson’s relations with other investors. After a thorough investigation by the Securities and Exchange Commission (SEC), Mr. Williamson now faces civil and criminal charges. Click here to read the SEC’s full complaint.