SEC Continues Crackdown on Financial Fraud Against Senior Citizens; Charges 26 Defendants in $428 Million Scheme

Sprawling fraud on U.S. investors involving the offer and sale of securities in the form of “Universal Leases,” structured as timeshares in several hotels in Cancun, Mexico, with a pre-arranged rental agreement that promised investors a high, fixed rate of return. However, for most of the scheme, primary orchestrator defendant Michael E. Kelly and his organization simply used new investor funds raised in the scheme to make illusory payments to earlier investors. Additional defendants included a number of unregistered brokers who sold the Universal Leases to the investing public. Over $428 million raised, including more than $136 million from IRA accounts, and over $300 million lost. The SEC obtained injunctions and final judgments against fourteen defendants (voluntarily dismissing claims for disgorgement against a couple of those, in view of related criminal proceedings). Claims against the rest were voluntarily dismissed either because defendants died during pendency of the action, or were to be fully redressed (and/or the defendants were under the authority of a special master) in related criminal proceedings. Administrative proceedings were also brought against many of these defendants.