Georgia Firm Accused of Ponzi Scam Before Stock Sale - CRE Capital Corp. and owner James Ossie, 48

Georgia Firm Accused of Ponzi Scam Before Stock Sale

By David Scheer and Laurence Viele Davidson

Jan. 15 (Bloomberg) -- A Georgia currency trader and his firm cheated investors in a $25 million Ponzi scheme and planned to raise $100 million in a stock offering, U.S. regulators said in lawsuits today.

CRE Capital Corp. and owner James Ossie, 48, falsely promised investors 10 percent monthly profits on U.S. and Japanese currency bets, the Securities and Exchange Commission said in a suit at federal court in Atlanta. In reality, money from new investors was used to pay returns to early participants, while the firm’s trading lost more than $12 million since June, the agency said. More than 120 investors were lured into the scheme, it said.

Bernard Madoff’s alleged $50 billion Ponzi fraud and declines on global markets are spurring investors and regulators to question money managers who claim to deliver consistent profits. Federal authorities are probing other money managers suspected of similar swindles of as much as $1 billion, people familiar with the matter said Jan. 2.

Investors must “be skeptical of promoters promising exorbitant returns,” said Katherine Addleman, head of the SEC’s office in Atlanta. “Such claims should be a red flag.”

The SEC and Commodity Futures Trading Commission, which filed a parallel lawsuit, want Ossie and his firm to pay unspecified fines and forfeit profits.

“They are fully cooperating with the government and making all records available,” said William Leonard, an Atlanta-based attorney representing the defendants.

CEO, CFO

Ossie didn’t return a telephone message left at his office. Records in the Georgia Secretary of State’s office list him as CRE’S chief executive officer, chief financial officer and secretary.

Potential clients were presented with a lengthy resume for Ossie that listed prominent positions in the financial community, according to information obtained by the SEC, said William Hicks, the Atlanta branch’s regional trial counsel, in an interview. Ossie claimed, for instance, he pioneered the time-share division for the Marriott hotel chain, Hicks said.

Records at Marriott International Inc.’s fractional ownership division don’t show anyone with Ossie’s last name having worked there, spokesman Ed Kinney said in an e-mail.

The CFTC and SEC officials refused to say how or when regulators discovered the alleged scheme. Stephen Obie, acting CFTC director for enforcement, said that generally when investors are unable to withdraw their money, that’s when his agency learns about a case.

Assets Frozen

Ossie, who lives in Atlanta, and his Alpharetta, Georgia- based firm allegedly told investors they would hold an unregistered stock offering in “early 2009,” according to the SEC’s suit. They consented to a court order today freezing assets and appointing a receiver, Addleman said.

CRE required clients to form businesses and asked them to invest in increments from $100,000 to $10 million, according to the SEC’s suit. Investors with less than $100,000 were allowed to pool their funds, it said. CRE made the trades through accounts at Deutsche Bank AG in London and Forex.com, a unit of Gain Capital Holdings Inc. Those companies weren’t accused of wrongdoing.

Madoff, 70, was charged with securities fraud Dec. 11 at federal court in Manhattan after allegedly telling his sons his New York-based investment advisory business had been “one big lie” and that he was “finished.” The SEC, which sued him, is seeking to unravel the extent of the losses and recoup money for investors.

To contact the reporters on this story: David Scheer in New York at dscheer@bloomberg.net; Laurence Viele Davidson in Atlanta lviele@bloomberg.net.