COLUMBUS, Ohio and MADISON, Wis. (3/15/13)--Financial institution and securities regulators from 16 states and five Canadian provinces sent alerts Thursday warning of an investment scheme where investors are told to wire money to Eastern Europe.
Credit unions may want to alert members to the scheme, which several state regulators say is illegal.
The Ohio Department of Commerce Division of Securities and the Wisconsin Department of Financial Institutions (DFI) are among the state regulators issuing warnings against a United Kingdom company called Inter Reef Ltd., doing business as Profitable Sunrise, and its operators, owner Roman Novak and his brother Radoslav Novak. The entity operates through a website, profitablesunrise.com.
According to the Ohio division, which issued a notice order against the company, Ohio securities laws were violated. The division alleged the company has engaged in securities fraud, selling securities without a license and selling unregistered securities.
"Ohioans should be on guard and hold onto their wallets any time they hear of a no risk/high return investment," said David Goodman, director of the Ohio Department of Commerce, in a press release.
The company promises investors risk-free returns of 1.6% to 2.7% per day for periods ranging from 180 to 240 days, said Patricia Struck, administrator of the Division of Securities at the Wisconsin DFI. The DFI oversees state-chartered credit unions and other financial related institutions.
Struck advised investors to be "extremely wary of any offers" from the company. "The promises being made by this company appear to be in the 'too good to be true' category," she said.
Investors have been instructed to wire money to financial institutions in Eastern Europe, including one bank located in the Czech Republic. The company's activities could be considered the sale of unregistered securities, which is illegal in Wisconsin, she said.
The Ohio Department of Commerce, which supervises credit unions and other financial institutions, noted the company's website also has a "referral program" where individuals can become regional representatives for an investment group, which includes trains of a pyramid scheme. The department said it was concerned that the businesses could be targeting religious-based organizations. The company's website includes Bible quotations and options for donating investment returns to charity.
Securities officials in North Carolina and South Dakota have issued cease and desist orders against Profitable Sunrise.
If credit union members report dealings with the company, they should contact their state's securities regulator. Also before investing, they should ask these questions:
Is the brokerage firm and salesperson licensed in the state?
Has any enforcement action been taken against them?
Has the security been properly registered with the state's securities regulator?