Yesterday was a busy day for the Fort Worth division of the SEC. Earlier that morning, news of the SEC’s recent complaint against Dallas-based bank holdings company AmeriFirst Funding Inc. – and the subsequent investor fraud allegations – were leaked to Market News First. Now, just under an hour ago, the SEC released a statement in which they announced that an emergency lawsuit had been filed against the company, along with a temporary restraining order halting AmeriFirst’s offering of Secured Debt Obligations (SDOs) and a notice that the company’s assets were to be immediately frozen.The story leading up to the announcement is as old as the market itself; allegations and complaints of financial mismanagement had surfaced against AmeriFirst, which had reportedly lured numerous investors – mainly senior citizens – into purchasing SDOs through “a series of misrepresentations and omissions” that portray SDOs as safe, FDIC-backed certificates of deposit supposedly insured by prestigious organizations such as Lloyd’s of London, the Fireman’s Fund, and Allianz, when, in reality, the certificates are anything but.
“According to the complaint, the SDOs are fraught with undisclosed risks,” the statement read. “For instance, the [SEC] contends that the SDOs are not guaranteed by any commercial bank and are not insured as represented, if at all. Indeed, according to the complaint, the Fireman’s Fund and Allianz coverage represented in [AmeriFirst’s] offering materials does not exist and the Lloyd’s insurance provides only miniscule coverage at best.”
The statement goes on to mention the “checkered past” of the company’s Managing Director, Jeffrey Bruteyn, and how Bruteyn and the rest of the company engineered the fraud through misuse and misappropriation of investor funds.
The complaint itself – which was filed earlier this week on Monday, July 2 – goes into greater depth about Bruteyn’s history, including his suspension and subsequent removal from the NASDAQ, the numerous fines leveled against him for misrepresenting clients and failing to provide NASDAQ authorities with crucial information when it was requested, and his two Chapter 7 bankruptcies in 1996 and 2003.
The SEC also leveled their aim at AmeriFirst itself in the complaint; the entire company is currently under the microscope. The complaint claims that AmeriFirst Funding Inc. and its subsidiary, American Eagle Acceptance Corp., actively practice investment fraud with its SDOs, supposedly using the funds earned through these investors for creating or purchasing automobile financing receivables or placing the funds in government securities or high-quality corporate bonds. In reality, the complaint claims the money is transferred to Hess Financial Inc. – a company owned by Bruteyn – who then uses the funds as his own “personal checking account.”
