Federal regulators settled fraud charges against three Las Vegas residents who allegedly scammed investors out of millions by claiming they operated profitable automated trading systems that never actually existed.

In the meantime, it finalized a judgment against a California investment club manager, and launching a new task force to combat international market manipulation.

Las Vegas Trio Bilked 140 Investors With Fake Trading Bots

The Securities and Exchange Commission (SEC) announced last week it reached agreements with Calvin Guess, Marcus Ligon, and their now-defunct company 5 Fruits Enterprises LLC over a scheme that raised $4.7 million from more than 140 investors between 2021 and 2023.

The trio promised investors incredible returns through automated trading "bots" that would execute options trading algorithms.

“In reality, the SEC’s complaint alleges, Guess and Ligon misappropriated most of the money to pay their personal expenses and used about $1 million of investor funds to make Ponzi-like payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term to other investors,” SEC commented in the statement.

To maintain the illusion, the defendants created and distributed fake account statements showing growing balances in investors' accounts, according to the SEC complaint filed in Nevada federal court.

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Heavy Financial Penalties Await Court Approval

Under the settlement terms, which still need court approval, Guess, Ligon, and 5 Fruits would pay a combined total of over $2.6 million in penalties and disgorgement.

The company faces the largest penalty at $1.18 million, while Guess and Ligon each face $236,451 in civil penalties. All three defendants would also be jointly liable for $1.16 million in disgorgement plus $253,048 in interest.

Guess faces additional payments totaling over $1 million, while Ligon owes an extra $1.2 million in disgorgement and interest. The settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 Read this Term also includes conduct-based injunctions prohibiting both men from participating in future securities offerings or accepting investor funds.

California Investment Club Case Concludes

Separately, a California federal judge entered a final judgment against Austin D. Ellison-Meade, who managed an investment club called Baycap.io that prosecutors say was actually a fraud scheme.

Ellison-Meade raised at least $2.8 million from approximately 31 investors starting in 2019, claiming he would use their money for algorithmic securities trading. Instead, regulators say he spent the funds on luxury items and made payments to earlier investors to keep the scheme running.

The court ordered Ellison-Meade to pay $2.9 million in disgorgement plus $820,668 in interest, though those payments will be satisfied through restitution orders in his parallel criminal case.

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New Task Force Targets International Fraud

The enforcement actions came as the SEC announced formation of a new Cross-Border Task Force aimed at combating international fraud affecting U.S. investors.

The task force will initially focus on foreign-based companies engaging in potential market manipulation, including "pump-and-dump" and "ramp-and-dump" schemes. It will also examine gatekeepers like auditors and underwriters that help foreign companies access U.S. capital markets.

“We welcome companies from around the world seeking access to the U.S. capital markets,” said SEC Chairman Paul S. Atkins. “But we will not tolerate bad actors – whether companies, intermediaries, gatekeepers or exploitative traders – that attempt to use international borders to frustrate and avoid U.S. investor protections.”

The new unit will pay particular attention to companies from jurisdictions like China, where governmental control creates unique investor risks, according to the announcement.

Related: U.S. Watchdog Targets Cross-Border Fraud with Dedicated Unit