Firm defrauded 3,400 investors of $287M, SEC says

Civil charges filed against company in Hallandale

The U.S. Securities and Exchange Commission has filed civil charges against 1 Global Capital of Hallandale Beach and ex-CEO Carl Ruderman for allegedly defrauding at least 3,400 retail investors out of $287 million.

Federal prosecutors based in South Florida are also investigating the company, which advertised itself as a lending firm that provided cash for small businesses in need. 1 Global and several affiliates filed for Chapter 11 bankruptcy protection in late July after word of federal inquiries effectively shut off its access to fresh funds, according to bankruptcy court papers.

In its complaint filed in U.S. District Court in Miami, the commission alleges that the cash advance company and Ruderman fraudulently raised millions by selling unregistered securities to investors through a network of agents that included brokers barred from the industry. Ruderman moved money to several other companies he controlled, including one that formerly owned Playgirl Magazine and other adult publications, the SEC alleged. He also misappropriated $35 million, the complaint says, to finance a vacation to Greece, buy a Mercedes-Benz and pay a personal chef.

“We allege that 1 Global’s business model was a sham because instead of using investor funds as promised, 1 Global and Ruderman diverted significant funds, including to Ruderman himself for his personal benefit,” Eric I. Bustillo, director of the SEC’s Miami Regional Office, said in a statement. “The SEC’s investigation effectively stopped 1 Global’s offering and prevented further harm to investors and retirement funds.”

U.S. District Judge Beth Bloom granted an SEC request for a temporary asset freeze against Ruderman, 1 Global Capital and several affiliated companies. The court also granted the commission’s request to appoint a receiver to oversee the companies.

Bloom scheduled a Sept. 7 hearing for Ruderman and the companies to show why the freeze should not continue for the duration of the litigation, the commission said Tuesday.

Attorney Jeff Marcus, who represents Ruderman, and Jed Dwyer, who represents 1 Global Capital, did not return phone calls seeking comment. But Jeffrey Neiman, who also represents Ruderman, told the Wall Street Journal in an email that his client did nothing wrong. “We are confident that all money will be accounted for at the end of the day,” he said.

Other companies named in the suit include Digi South LLC, which owned Playgirl, as well as Bright Smile Financing LLC, BRR Block Inc., Ganador Enterprises LLC, Media Pay LLC, and Pay Now Direct LLC.

According to the SEC’s complaint unsealed Tuesday, investors were promised profits from 1 Global’s loans to small and mid-sized companies. But large portions of their money went to the consumer-loan companies, Bright Smile Financing and Ganador Enterprises, “which had nothing to do with 1 Global’s cash advance business,” the SEC alleged.

“Investors in 1 Global allegedly were given bogus account statements and were falsely told that it had an independent auditor, and that its secured loans, typically for small amounts, had low default rates,” the SEC said.

The complaint says 1 Global also moved $805,000 to Digi South LLC.

After 1 Global filed for Chapter 11 in July, Ruderman

and other executives resigned their posts, according to bankruptcy court files in Fort Lauderdale. Ruderman was paid an annual salary of $240,000 as chairman, and received monthly distributions of $83,000.

The business, which operated out of leased offices at 1250 E. Hallandale Beach Blvd., once employed 100 people. It is now overseen by a restructuring specialist supervised by a U.S. Bankruptcy Court judge.

A case management summary filed with the bankruptcy court reported that both the SEC and U.S. Attorney’s Office in Miami had been investigating the company and requested documents.

Although the SEC was the first to file its civil complaint,

there has been no word from federal prosecutors that they intend to file criminal charges. In its statement Tuesday, the SEC acknowledged receiving assistance from the FBI, U.S. attorney, and state financial regulators in Florida and Colorado.

According to bankruptcy court files, the company’s main unsecured creditors are investors from a number of states in the south, midwest and far west. Several invested more than $1 million from individual retirement accounts. Others invested well into the six figures.