1300 W. Washington Street

Phoenix, AZ 85007-2996

 

 

Main: (602) 542-4242

Email: SecuritiesDiv@azcc.gov

Current News

COVID-19 Coronavirus-Related Investment Schemes Anticipated, Corporation Commission Offers Guidance on How to Protect Yourself

Amid the ongoing COVID-19 coronavirus pandemic, the Corporation Commission continues to alert investors to be on guard against an anticipated surge of fraudulent investment schemes. 

“In these extraordinary times, the health and welfare of all must be our foremost concern, and that includes our financial health. The primary focus of the Securities Division remains on the protection of Arizona investors,” said Chairman Bob Burns.

The Commission anticipates fraudulent investment schemes may surface as a result of the ongoing pandemic. The concern is that scammers will target investors, capitalizing on recent developments in the economy and preying on concerns about the volatile securities market. With that in mind, investors must remain vigilant to protect themselves.

In particular, the Corporation Commission’s Securities Division is warning investors to be on the lookout for investments specifically tied to the threat of COVID-19 coronavirus. Bad actors can be expected to develop schemes that falsely claim to raise capital for companies manufacturing surgical masks and gowns, producing ventilators and other medical equipment, distributing preventative pharmaceuticals, or manufacturing vaccines and miracle cures. The schemes often appear legitimate because they draw upon current news, medical reports and social and political developments. 

Scammers might seek to take advantage of concerns with the volatility in the securities markets to promote “safe” investments with “guaranteed returns” including investments tied to gold, silver and other commodities; oil and gas; and real estate. Also, investors could expect to see “get rich quick” schemes that tout fast, guaranteed returns that can be used to pay for rent, utilities or other expenses. These schemes typically target retirees and senior citizens, falsely claiming they can quickly and safely recoup any losses to their retirement portfolios. The Commission’s Securities Division suggests investors stay clear of any investment that sounds too good to be true such as guarantees of high returns with no risk. 

Most importantly, investors need to verify the promoter’s licenses and registration with the Commission’s Investigator on Duty by telephone at 602-542-0662, toll free in Arizona at 1-866-VERIFY-9 (837-4399) or by email at SecuritiesDiv@azcc.gov. The Corporation Commission’s investor education website has helpful information on wise investing and fraud prevention at www.azcc.gov/azinvestor.

INVESTOR BEWARE: Schemes to Watch for and How to Protect Yourself

  • Private placements and off-market securities. Scammers will take advantage of concerns with the regulated securities market to promote off-market private deals. These schemes will continue to pose a threat to retail investors because private securities transactions are not subject to review by federal or state regulators. Investors must continue to ask and check before they invest in private offerings by independently verifying the facts for themselves.  
  • Gold, silver and other commodities. Scammers may also take advantage of the decline in the public securities markets by selling fraudulent investments in gold, silver and other commodities that are not tied to the stock market. These assets may also be attractive because they are often promoted as “safe” or “guaranteed” as hedging against inflation and mitigating systematic risks. However, scammers may conceal hidden fees and mark-ups, and the illiquidity of the assets may prevent retail investors from selling the assets for fair market value. The bottom line is there really are no “can’t miss” opportunities.
  • Recovery schemes. Retail investors should be wary of buy-low, sell-high recovery schemes. For example, scammers will begin promoting investments tied to oil and gas, encouraging investors to purchase working or direct interests now so they can recognize significant gains after the price of oil recovers. Scammers will also begin selling equity at a discount, promising the value of the investments will significantly increase when the markets strengthen. Investors need to appreciate the risks associated with any prediction of future performance and recognize that gains in the markets may not correlate with the profitability of their investments.
  • Get-rich-quick schemes. Scammers will capitalize on the increased unemployment rate by falsely touting their ability to quickly earn guaranteed returns that can be used to pay for rent, utilities or other expenses. They may also target retirees and senior citizens, falsely claiming they can quickly and safely recoup any losses to their retirement portfolios. Remember: if it sounds too good to be true, it probably is.
  • Real estate schemes. Real estate investments may prove appealing because the real estate market has been strong and low interest rates have been increasing the demand for housing. Scammers often promote these schemes as safe and secure, claiming real estate can be sold and the proceeds can be used to cover any losses. However, real estate investments present significant risks as changes in the economy and the real estate market may negatively impact their performance. 

Investment Fraud Prevention Tips

The Corporation Commission’s Securities Division offers the following guidance to help investors avoid anticipated schemes that seek to take advantage of them.  

  • Ask questions and research the investment, the company and person offering it. Investors should always ask if the salesperson, the company and the investment itself are registered by a regulator. This information can be confirmed by the Investigator on Duty at the Corporation Commission’s Securities Division. Also, investors can check the SEC’s Investment Adviser Public Disclosure database and FINRA’s BrokerCheck. Avoid doing business with anyone who is not authorized to sell securities.  
  • Beware of miracle cures. Scientists and medical professionals have yet to discover a medical breakthrough or have developed a vaccine or means to cure COVID-19. Not surprisingly, the vaccines being sold by online pharmacies are not real. You should not send money or make payments over the telephone to anyone claiming they can prevent COVID-19, have a vaccine or other preventive medicine.
  • Avoid fraudulent charity schemes. White-collar criminals may pose as charities soliciting money for those affected by COVID-19. Before donating, you should independently verify any charity that is raising money for the sick or secure donations to help uninsured persons pay for medical treatment. You should also avoid online solicitations for cash and gift cards, as these schemes have become a popular way for scammers to steal money. Think with your head and not with your heart. If you want to donate to a cause, you should work with a legitimate, established organization. 
  • Be wary of schemes tied to government assistance or economic relief. The federal government will be sending checks to certain individuals and businesses as part of its economic stimulus legislation. It will not, however, require the prepayment of fees, taxes on the income, the advance payment of a processing fee or any other type of charge. Anyone who demands prepayment will almost certainly steal your money. And don’t give out or verify any personal information either. Government officials already have your information. No federal or state government agency will call you and ask for personal information.

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August 7, 2019
Idaho Man and his Company Sold Unregistered Promissory Notes

The Corporation Commission ordered Roland B. Woolsey of Idaho and his affiliated company, Skytrace, Inc., to pay $142,500 in restitution and $10,000 in administrative penalties for offering and selling unregistered promissory notes. Woolsey and Skytrace, Inc. were seeking to raise $10 million in order to market a web-based inventory application but are not registered to offer or sell securities in Arizona.

In settling this matter, the respondents neither admit nor deny the Commission’s findings, but agree to the entry of the consent order. All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov and entering docket number S-21055A-18-0309.

July 11, 2019
Commission Finds Phoenix Man Defrauded Hispanic Christians with Promissory Notes

The Corporation Commission ordered Jaime A. Verdugo of Phoenix to pay $381,954 in restitution and a $20,000 administrative penalty for committing securities fraud. The Commission found Mr. Verdugo was not registered to offer or sell securities in Arizona when he solicited multiple promissory note investors, most of whom were from Hispanic Christian communities. The Commission found Jaime A. Verdugo told investors, on behalf of Verdugo Enterprises, LLC, that their money was going to purchase home decor products to fulfill online orders.However, the Commission found Mr. Verdugo mislead investors by stating their money was safe while knowing at least eight prior investors did not receive any investment returns. Also, the Commission found Jaime A. Verdugo failed to inform investors about the company’s unwritten policy to limit payouts to $6,000 every two weeks, which is contrary to the explicit terms of the promissory notes.

All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov and entering docket number S-21064A-18-0402.

June 11, 2019
Commissioners sanction Laveen man for unlawful sale of securities

The Corporation Commission ordered Carlton Lamont Fox of Laveen, Arizona, and his affiliated company to pay $15,200 in restitution and a $5,000 administrative penalty for participating in the unlawful offer and sale of unregistered securities while not being registered as an Arizona securities salesman or dealer. The Commission found at least 17 investors were promised a return on their initial investment within 3-6 months, funding either the purchase of leads for prospective businesses that were interested in credit card reader terminals or for the purchase of the terminals that would be subsequently sold to interested businesses. The Commission found that Fox and his affiliated company, Fox First Services, LLC, participated in the unlawful sale of securities as an unregistered salesperson or dealer. Further, the Commission found that none of the investors received a full return of their original investment, and that Fox used some of the money to pay telemarketers for their work in soliciting investor funds. In settling this matter, respondents neither admitted nor denied the Commission findings, but agreed to the entry of the Commission's consent order.

All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov and entering docket number S-21059A-18-0345.

June 11, 2019
Commissioners order more than $2 million in restitution to restore investors

Arizona resident Adam W. Child agreed to pay $2,014,592 in restitution and a $25,000 administrative penalty for selling promissory notes and LLC membership interests to investors. The Corporation Commission found that Child offered and sold notes and membership interests to at least 17 investors of Titan Funding Group I, LLC and Titan Capital Real Estate Fund I, LLC. The Commission found the investor funds were pooled to lend money to real estate developers who were to purchase and "flip" residential properties. However, the Commission found that Mr. Child violated the Securities Act's antifraud provisions when he failed to disclose to investors a previous judgment against him, that he had declared bankruptcy and that his prior mortgage-lending business had its license revoked.

In settling this matter, the respondent agreed to the entry of the consent order and admitted to the Commission's findings only for purposes of the administrative proceeding. All documents relating to this agenda item can be found in the Corporation Commission's online docket at https://edocket.azcc.gov and entering docket number S-21054A-18-0301.

May 15, 2019 
Densco Investment Corporation Investors to Receive Additional Restitution 

Last week, investors of DenSco Investment Corporation were awarded a second monetary distribution for losses incurred as a result of their investment in a fraudulent company. On May 10, 2018, Maricopa County Superior Court approved the receiver’s motion to provide a second distribution in the amount of $2.5 million to DenSco Investment Corporation investors. This comes on the heels of a decision by the court in December 2017 where the receiver’s first motion was approved and $4.5 million was distributed to investors.

DenSco Investment Corporation was a real estate investment firm based in Chandler, Arizona that ceased doing business in 2016. The company was obtaining loans against hundreds of properties that were never actually purchased. As a result of this fraud, action was brought against the company by the Arizona Corporation Commission for violations of the Arizona Securities Act. Due to the death of the sole owner of the corporation, a receiver was appointed by the court in 2016. A receiver is a person appointed by the court to take possession and charge of designated assets or property and to administer them in accordance with court directives.

To date, DenSco Investment Corporation investors have been awarded roughly $7 million in distributions approved by the court. The receiver continues to recover assets and claims on behalf of the receivership and believes that more funds will be available for distribution at a later date.

                                                                     

 

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