According to an SEC complaint filed in federal court a few days ago, investors who trusted Roy Dekel and Diverse Financial Corporation in Newport Beach may have instead invested in a multimillion dollar Ponzi scheme.
Of course all Ponzi scheme victims deserve sympathy, but I am particularly sympathetic to the victims in this case because, from the facts in the SEC’s complaint, this scheme lacked some of the common red flags that indicate that an investment is really a scam.
While many investment scams offer unrealistic returns, the promissory notes that Roy Dekel and Diverse Financial offered through DF Capital Partners, LLC offered annual returns of 6-9%. That is not unrealistic for a junk bond. In contrast, one Ponzi scheme we are currently working on offered investors a 35% quarterly return, which is more typical of Ponzi schemes.
Potential investors received a term sheet, an investment overview, and a note purchase agreement before investing. According to the SEC, these documents stated that investor funds would be loaned to premium finance lenders. Premium finance is a real investment niche and serves a significant function in the viatical (also called life settlement) industry. While most folks may not be familiar with viaticals or the secondary market for life insurance, there is a real secondary market for life insurance, and premium finance does help serve that market. In contrast, may Ponzi schemes promise outsized returns based on some new wonder product—like a lightbulb that cures cancer, which is one I heard recently—which most savvy investors would realize is a scam.
Ultimately, in the words of the SEC, “Defendants looted the proceeds of the DF Capital Notes to sustain the operations of Diverse Financial and its affiliates and to make Ponzi-like payments to certain investors.” “Diverse Financial and Dekel misappropriated 100% of investors’ monies.”
In the same lawsuit, the SEC also filed securities fraud charges against David Kandell along with Diverse Financial’s CEO, Roy Dekel. While Mr. Kandell was Diverse Financial’s former president, his exact role in perpetrating this investment fraud seems less clear.
Diverse Financial and Mr. Dekel allegedly misappropriated approximately $3.3 million, taken from at least 16 investors over a 2.5 year period. While where much of this money went is still a mystery, Mr. Dekel and Diverse Financial have both filed for bankruptcy. Their cases are pending.
While Ponzi scheme con artists frequently file for bankruptcy, their cases rarely result in a discharge. Bankruptcy cases generally start when the debtor files a bankruptcy petition and end with a discharge that wipes out the debtor’s debt. However, a discharge may be generally denied—or at least denied for money owed to investors, with the right legal counsel fighting the bankruptcy.
If you think your investments have suffered losses due to investment fraud or financial advisor negligence, the investor attorneys at Investor Defense Law LLP may be able to help, and offer free initial consultations.
Investor Defense Law LLP is a law firm dedicated to helping investors in California, Georgia and Washington State recover losses caused by stockbrokers, financial advisors, and investment firms. To learn more, contact an investment fraud attorney at 800.487.4660.