The Securities and Exchange Commission (“SEC”) charged SW Argyll Investments, LLC (“Argyll”) and two of its senior executives for allegedly operating an illegal stock-based lending service scam. The complaint alleged that Argyll, through its agents, deceived borrowers into pledging publicly traded stock, at a discount, promising the return of the securities at the end of the loan term. Instead, the collateralized securities were sold within days to fund the loans.
The complaint alleged that since 2009, on at least 9 different occasions, Argyll scammed affiliates to stock-collateralized loans, under false promises that the shares would be returned to borrowers upon repayment of the loans. The purported business began with the issuance of a “Loan Offer,” the SEC alleged. Upon the victim’s acceptance of a Loan Offer, the victims received a “Loan Package” containing a “Loan Agreement,” a “Pledge Agreement,” a “Promissory Note,” and other documents. The Loan Package did not permit Argyll to sell the collateral except in the event of default.
The SEC stated that Argyll’s senior executives “thought they had devised a foolproof way to make substantial risk-free profits, but their purported business model was nothing more than an illegal get-rich-quick scheme.” Since the loans were generally valued at only 30% to 50% of the pledged stock’s market value, plus interest, Argyll received more than $8 million in unlawful gains.