SEC Charge Central Florida Man in $100 Million Unregistered Securities Offering
On August 11th, 2023, the Securities and Exchange Commission (SEC) announced investment fraud charges against Ashraf Mufareh of Central Florida. Notably, the company that Mr. Mufareh owned and controlled (ONPASSIVE LLC) was also named as a defendant. Federal authorities contend that Mr. Mufareh fraudulently raised at least $100 million from more than 800,000 different investors. Within this article, our Miami unregistered securities losses attorney provides an overview of the charges filed by the SEC in connection with this case.
Allegations: ONPASSIVE LLC is a Pyramid Scheme
In a civil complaint filed in the United States District Court for the Middle District of Florida, the SEC argues that Ashraf Mufareh fraudulently raised $108 million from approximately 800,000 investors around the world. Mr. Mufareh has been raising funds from investors since 2018. Notably, the SEC alleges that ONPASSIVE LLC was effectively a pyramid scheme.
Federal regulators claim that the defendants used AI-based systems to lure investors into a $97 million multi-level marketing scheme. They were promised passive income from subsequent investor subscriptions. That being said, no applications were launched and no commissions have been paid. Instead, the SEC alleges that the defendants misrepresented product launch and potential profits.
As part of its complaint, the SEC argues that ONPASSIVE LLC was selling unregistered securities. The agency alleges violations of federal securities. All appropriate remedies are being sought, including immediate injunctive relief against Mr. Mufareh and his company, and officer/director bar against Mr. Mufareh, and full disgorgement of ill-gotten proceeds.
Understanding Investment Fraud: What is a Pyramid Scheme?
Unfortunately, investment fraud remains a serious issue. Too many investors are taken advantage of by unscrupulous parties. A pyramid scheme is a form of investment where returns for older investors are paid using the capital of newer investors. In effect, this means that money is more or less being shuffled around. In most cases, little or no profits are generated from legitimate business activities. As the scheme progresses, it demands a constantly increasing number of participants to sustain payouts to earlier investors. Here are some key characteristics to identify a pyramid scheme:
- A Focus on Recruitment: Rather than promoting a genuine product or service, the primary focus is on recruiting new participants to bring in funds.
- A Promise of High Returns: The perpetrators of pyramid schemes often lure participants with promises of high returns in a short period.
- A Complex Commission Structure: Payments to participants are based on the number of new recruits they bring in, often in complicated commission structures.
- An Inevitable Collapse: As recruiting slows down, the scheme cannot sustain payouts, causing losses for the majority, especially those at the bottom.
Contact Our Miami, FL Unregistered Securities Attorney Today
At Carlson & Associates, P.A., our Florida securities fraud lawyers are driven to help investors get justice. If you suffered losses in unregistered securities, we are here to help. Give us a phone call now or contact us directly online to arrange your fully private case assessment. With a law office in Miami, we handle unregistered securities cases throughout Southeast Florida.