The Securities and Exchange Commission has charged two men who provided the biggest influx of high-net-worth investor funds into one of the largest ever Ponzi schemes in South Florida.

The SEC alleges that George Levin and Frank Preve, who live in the Fort Lauderdale area, raised more than $157 million from 173 investors in less than two years by issuing promissory notes from Levin's company and interests in a private investment fund they operated.
They used investor funds to purchase discounted legal settlements from former Florida attorney Scott Rothstein through his prominent law firm, Rothstein Rosenfeldt and Adler PA. However, the settlements Rothstein sold were not real and the supposed plaintiffs and defendants did not exist. Rothstein simply used the funds in classic Ponzi scheme fashion to make payments due other investors and support his lavish lifestyle. Rothstein's Ponzi scheme collapsed in October 2009 and he is now serving a 50-year prison sentence.

The SEC says that Levin and Preve misled investors by claiming that they had procedural safeguards in place to protect investors' money when in fact they often purchased settlements without first seeing any legal documents or doing anything to verify that the settlement proceeds were actually in Rothstein's bank accounts. Moreover, as the Ponzi scheme was collapsing and Rothstein stopped making payments on prior investments, Levin and Preve sought new money from investors while falsely touting the continued success of their investment strategy. With their fate tied to Rothstein, Levin's and Preve's settlement purchasing business collapsed along with the Ponzi scheme.

"Levin and Preve fueled Rothstein's Ponzi scheme with the false sense of security they gave investors," said Eric I. Bustillo, Director of the SEC's Miami Regional Office. "They promised to safeguard investors' assets, but gave Rothstein money with nothing to show for it."

According to the SEC's complaint filed in federal court in Miami, Levin and Preve began raising money to purchase Rothstein settlements in 2007 by offering investors short-term promissory notes issued by Levin's company, Banyon 1030-32 LLC. In 2009, seeking additional funds from investors, they formed a private investment fund called Banyon Income Fund LP that invested exclusively in Rothstein's settlements. Banyon 1030-32 served as the general partner of the fund, and its profit was generated from the amount by which the settlement discounts obtained from Rothstein exceeded the rate of return promised to investors.

The SEC alleges that the offering materials for the promissory notes and the private fund contained material misrepresentations and omissions. In all, according to one account, Banyon raised $57 million from ninety investors who purchased the promissory notes. According to another account, the SEC wants a judge to force him to pay that amount as a penalty for breaking s5 Securities Act, with interest, along with a 'second level' civil settlement of $5.7 million.