Ponzi Scheme Taken Down in Denver

As if the Bernie Madoff scandal was not enough… The Securities and Exchange Commission has just announced this Tuesday that it has new fraud charges as well as an emergency asset freeze against a Denver-based company. The SEC charges include Bridge Premium Finance LLC, as well as two individuals (Michael J. Turnock of Denver and William P. Sullivan II of Highlands Ranch).

The SEC allegations noted that they sold promissory notes to investors through Bridge Premium Finance LLC, which purports to be in the business of insurance premium financing. As far as what was offered, it was annual returns of up to 12 percent by making short-term loans to small businesses to enable them to pay their up-front commercial insurance premiums.

Turnock and Sullivan assured investors that Bridge Premium's business was performing well and that investor funds were "100% Protected" through various forms of collateral on the underlying loans.

The SEC said that Bridge Premium has been paying investor returns with funds from other investors since 2002 and it also noted that this business has been unprofitable and its obligations to noteholders have far exceeded its total assets.

Here is the kicker for investors: "Because most funds were diverted for Ponzi payments, any collateral available on Bridge Premium's underlying loan portfolio will only protect a small fraction of its promissory note investors. Furthermore, Bridge Premium's offering was not registered with the SEC as required under the federal securities laws… In May 2012 after more than a decade of Ponzi payments and operational losses, Bridge Premium owed investors more than $6.2 million, yet its insurance premium loan portfolio totaled less than $250,000 and its assets totaled less than $500,000."

This may sound like small potatoes, but it is just one more local shock to the system.


Filed under: 24/7 Wall St. Wire, Regulation