Were You A Victim of the SMFG, Inc. Ponzi Scheme With Ronald Fossum Jr.?

Ponzi Scheme image

Erez Law is currently investigating Washington financial advisor Ronald Fossum Jr. (CRD# 3194203) regarding fraud based on his misappropriation of fund assets and misrepresentations to retail investors about the financial condition of three funds he operated in a Ponzi-like fashion. Fossum was registered with Mutual of Omaha Investor Services, Inc. in Lynnwood, Washington from 2000 to 2008.

In December 2017, the United States Securities and Exchange Commission (SEC) opened up an investigation against Fossum alleging that he raised more than $20 million from more than 100 investors in three pooled investment funds that he managed:

  • Smart Money Secured Income Fund, LLC, which invested principally in real estate, websites, oil and gas ventures, and securities
  • Turnkey Investment Fund, LLC, which invested in oil and gas ventures
  • Accelerated Asset Group, LLC (“Accelerated Asset”), which invested in distressed consumer debt

The SEC alleges that between March 2011 and June 2016, Fossum managed the three funds through three entities that he owned and controlled, SMFG, Inc., Smart Money Secured Income Fund Manager, LLC, and Turnkey Investment Fund Manager, LLC. It is alleged that Fossum engaged in multiple fraudulent and deceptive acts, including misappropriating money for various personal expenses, misrepresenting the financial condition of the funds, concealing one fund’s inability to redeem investments as promised in offering documents to investors, and indiscriminately commingling fund assets and transferring money between funds.

The SEC alleges that Fossum and a partner, Alonzo R. Cahoon defrauded Turnkey Fund and Turnkey Fund’s investors by representing in fund offering documents that he would charge a one-time “management fee” of $2,990 per Turnkey Fund investment unit when, in fact, Fossum secretly took $20,000 or more from each investment unit sold. Additionally, it is alleged that Fossum offered and sold interests in Smart Money Fund and Turnkey Fund securities without a registration statement for the offerings or any applicable exemption from registration. The SEC alleges that Fossum acted as an unregistered broker by effecting transactions in Turnkey Fund securities and receiving transaction-based compensation for those transactions.

According to the SEC complaint, Fossum defrauded investors of the SMFG Funds by improperly using money from the funds for his personal expenses, including mortgage payments on a home for three years, $150,000 in personal tax liabilities, and $40,000 in travel expenses for seminars at luxury resorts.

It is also alleged that Fossum repeatedly misrepresented the financial condition of Smart Money Fund to investors, claiming at one point that Smart Money Fund had more than $40 million in assets and only $10 million in liabilities when, in fact, Smart Money Fund’s assets were closer to $14 million. In June 2015, a number of Smart Money Fund investors sought redemptions, but Smart Money Fund lacked the liquidity to satisfy those redemptions. Fossum continued to raise new investor money for Smart Money Fund after June 2015, while failing to disclose the liquidity crisis, and then used new investor money in part to pay off redeeming investors in a Ponzi-like fashion. The SEC also alleges that Fossum defrauded the SMFG Funds by disregarding each fund’s separate corporate form and commingling fund assets by transferring hundreds of thousands of dollars between the funds to meet their respective liquidity needs.

The SEC alleges that Fossum caused the SMFG Funds and the Managing Entities to file for bankruptcy in June 2016. The fund is currently being liquidated and, “it is not probable that it has sufficient assets for any meaningful repayment of the more than $20 million in principal contributed by investors.”

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.