SEC Gets $2.8M Judgment in Ponzi Scheme Case

May 18, 2020

Last week, the SEC obtained judgments against two men who operated a multi-million dollar Ponzi scheme. The SEC filed a complaint against Neil Burkholz and Frank Bianco on November 14, 2019.   The complaint charged them with operating a $6 million Ponzi scheme through their investment management companies, Palm Financial Management, LLC and Shore Management Systems, LLC.  The SEC alleges that Burkholz and Bianco used investor funds to make payments to other investors and themselves.

Burkholz and Bianco defrauded at least 55 investors, including elderly investors and small-business owners, from around the world.  They solicited investors with false representations that their firms had highly profitable proprietary options strategies.  The SEC’s investigation revealed that only half of investors’ funds were invested.  The invested funds sustained near-total losses due to high risk options trading.

Burkholz and Bianco used the other half of investors’ funds to make payments to other investors and to themselves and their spouses for personal use.  The SEC named their spouses as relief defendants because they received investor proceeds due to their husbands’ fraud.  According to the SEC, Burkholz and Bianco hid their fraud by providing investors with false reports which showed the investments generating positive returns.

Last week, U.S. District Court for the Southern District of Florida entered a default judgment against Burkholz.  The court ordered him to pay ordered to pay disgorgement and prejudgment interest totaling $429,580, plus a $920,825 civil penalty.  The SEC’s litigation against Neil Burkholz’s wife, Rhoda Burkholz, is ongoing.

Bianco entered into a consent judgment with the SEC.  Without admitting or denying the SEC’s allegations, Bianco agreed to pay disgorgement and prejudgment interest totaling $443,997 and a civil penalty of $920,825.  Suzanne Bianco, wife of Frank Bianco, agreed to disgorge $49,751, plus prejudgment interest.

If you believe that you have been misled by a financial advisor or wish to engage the services of a securities lawyer, please call the Costello Law Group at 410-832-800 (or Toll Free 877-418-0003) for a free consultation. Tom Costello of the Costello Law Group has 25 years of experience in stockbroker misconduct and investment fraud.