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SEC Charges Two South Florida Men Who Provided Investors to Scott Rothstein’s Ponzi Scheme

The SEC charged George G. Levin and Frank J. Preve with inducing investors to purchase fraudulent legal settlements from now-convicted Ponzi schemer, Scott Rothstein.   The SEC alleged that from July 2008 to October 2009, Levin and Preve raised more than $157 million from 173 investors to fund the Ponzi scheme, becoming Rothstein’s largest source of capital.   The Rothstein Ponzi Scheme, one of South-Florida’s largest ever, began in 2005 with Rothstein offering others the opportunity to purchase legal settlements at a discount.  Rothstein falsely claimed to represent plaintiffs who had reached confidential settlements in different actions and were willing to assign their structured-settlement payments from Rothstein, Rosenfeldt and Adler trust accounts in exchange for a discounted, immediate cash payment.  In reality, there were never any legal settlements and the plaintiffs and defendants did not exist.

According to the SEC, after personally investing more than $1.7 million in Rothstein’s settlements, Levin used one of his dormant legal entities, Banyon 1030-32 to offer investors promissory notes with the stated purpose of purchasing discounted legal settlements from Rothstein.  Preve handled the paperwork related to these purchases.  Levin and Preve marketed the notes to investors as a minimal risk investment promising large returns.  Levin and Preve distributed to investors offering materials which stated that Banyon 1030-32 had procedural safeguards to ensure the safety of the investments.  Despite their representations, Preve often purchased settlements from Rothstein prior to receiving confirmation that the settlement funds had been wired into an RRA trust account.

The SEC stated, “Levin and Preve fueled Rothstein’s Ponzi Scheme with the false sense of security they gave investors.”  Scott Rothstein is currently serving a 50-year prison sentence.  In a joint statement, attorneys for Levin and Preve said that their clients were “two of the biggest victims of the Rothstein Ponzi scheme.”  They noted that Levin was “the person who first” reported Rothstein’s suspected crime to authorities in October 2009.  The defense attorneys added that Levin and Preve have been “cooperating with the SEC” since December 2009, including testifying and providing documents