The U.S. Securities and Exchange Commission has obtained a court order to stop an alleged US$27 million Ponzi scheme involving investors in the United States, Canada, and other countries.

The SEC said it charged Las Vegas-based Gold-Quest International and its three principals for the alleged misuse of investor funds in a scheme in which the SEC alleges that the firm and its owners misrepresented that investor funds would be pooled and invested in foreign currency exchange trading and would generate annual profits of 87.5%.

However, it maintains that no investor money was actually invested in foreign currency exchange trading. Instead, it claims that up to 88% of each investor’s principal was paid to the chain of promoters responsible for bringing the investor into the program.

The allegations have not been proven. But the SEC reports a U.S. district court judge issued an order freezing assets and appointing a temporary receiver over Gold-Quest and its affiliates. According to the SEC’s complaint, the firm and its owners claim they are not subject to the jurisdiction of the U.S. or Canada because they are members of the Little Shell Nation Indian tribe, purportedly headquartered in North Dakota. However, the SEC says that the Little Shell Nation is not recognized as a sovereign tribe or nation.

The commission also seeks preliminary and permanent injunctions, disgorgement, and civil penalties against all defendants. A hearing on whether a preliminary injunction should be issued against the defendants and whether a permanent receiver should be appointed is scheduled for May 14.

The SEC acknowledged the assistance of the Alberta Securities Commission, the British Columbia Securities Commission, the Manitoba Securities Commission, the Ontario Securities Commission, and the Nevada Secretary of State, Securities Division.

“This emergency action shows that the commission, together with foreign securities regulators, will move swiftly to stop ongoing frauds and protect investors, both in the United States and internationally. In the type of multi-level marketing scheme alleged in our complaint, the perpetrators enlist defrauded investors as their sales force to solicit new investors from among their family and friends. By preying on the mutual trust in such relationships, the alleged perpetrators in this case were able to easily expand their network of victims, even across international borders,” said Linda Chatman Thomsen, director of the SEC’s Division of Enforcement.