The U.S. Securities and Exchange Commission announced today that it has filed a lawsuit in connection with a securities fraud, allegedly run by a Canadian, that has raised at least US$30 million by offering phony “prime bank” investments over the Internet.

The SEC charges that the scheme victimized hundreds (and possibly thousands) of investors in the United States and Canada.

According to documents filed by the commission in the federal court for the Northern District of California, Tri-West Investment Club and Alyn Waage, a Canadian citizen residing in Puerta Vallarta, Mexico, may have raised more than $30 million from investors through its Web site. The site which solicits a minimum US$1,000 investment in a “bank debenture trading program” secured by “certain key International Prime Banks.”

Tri-West claims to guarantee a 120% annual rate of return with no risk to investors. In fact, according to the commission, the securities offered by Tri-West are entirely fictitious — “bank debenture trading programs” and other purported “prime bank” instruments do not exist.

Tri-West’s Web site further claims that the “bank debenture trading program” is managed by Haarlem Universal Corporation, purportedly “one of the largest and most prestigious trading companies in the world” with a 30-year history of generating high returns for investors.

According to the SEC, however, Haarlem is not a registered investment company, and has been in existence only since the scheme began in 1999. Documents submitted to the court by the commission show that Mexican authorities recently arrested Waage for entering Mexico with a suitcase containing US$4.5 million in undeclared cashiers cheques made payable to Haarlem.

The commission’s complaint charges that Tri-West and Waage violated the antifraud provisions of the federal securities laws as well as the federal registration provisions.

The SEC seeks emergency relief, including a court order freezing Tri-West’s assets. The commission’s lawsuit ultimately seeks the return of all investor funds as well as penalties and other relief from Tri-West and Waage. The complaint also names Haarlem as a relief defendant.

In a separate matter, the Office of the U.S. Attorney for the Eastern District of California has filed criminal charges against certain persons for their roles in the Tri-West investment scheme.

In June, the Manitoba Securities Commission took action against Ernest David Janzen of Winkler, Manitoba and Tri-West, ordering that all trading in the securities of Tri-West stop. Tri-West Investment Club was then using an address in Belize. Other Canadian and U.S. securities regulators have issued cease trade orders respecting Tri-West.