The U.S. Securities and Exchange Commission has secured a default judgment, asset freeze, and permanent injunction against two Canadians, who it alleges carried out a massive Ponzi scheme.

The SEC said Wednesday that a judge in the U.S. District Court for the Western District of Washington entered the judgment against defendants Gary Allen Sorenson and Milowe Allen Brost, both of Calgary, enjoining them from violating securities laws, and ordering them to pay disgorgement of over US$210 million of ill-gotten gains and a civil penalty of US$100 million. The court also permanently barred them from serving as officers or directors of public companies in the U.S.

The regulator’s complaint alleged that Brost and Sorenson were the primary architects and beneficiaries of a scheme that targeted more than 3,000 investors across the U.S. and Canada, purporting to be an independent financial education firm that had discovered profitable investment opportunities in gold mining companies. The SEC says that they held seminars where they promised investors could earn 18% to 36% annual returns by investing with these companies, and they claimed the investments were fully collateralized by gold.

It also alleged that, in fact, they were investing in shell companies owned or controlled by the pair and that investors’ funds were transferred through numerous bank accounts, and then used to make “interest payments” to investors, fund the few unprofitable companies that actually had operations, and personally enrich those involved in the scheme. A trial has been set to begin June 4, 2012. The allegations have not been proven.

The two men were also arrested by the RCMP in 2009, and charged with fraud over $5,000 and theft over $5,000. They were released on bail.

In the SEC’s case, pending determination on the merits, the court also entered preliminary injunctions against the corporate defendants, Merendon Mining (Nevada), Inc., Syndicated Gold Depository Inc., Institute For Financial Group of Companies, Inc. and Merendon Mining Corporation Ltd., and against several other U.S.-based individual defendants.

IE