Federal regulators allege Orem man ran Ponzi scheme
When Steven B. Heinz, of Orem, actually put investors' money into futures trading, he sometimes lost more than $100,000 in a single day. But much of the $4 million he raised went to Ponzi payments to other investors and to pay Heinz's personal credit card bills, household expenses and family vacations, federal regulators alleged in a lawsuit filed Thursday.
The Securities and Exchange Commission sued Heinz and his S.B. Heinz & Associates Inc., alleging Heinz defrauded more than 15 investors when he persuaded them to let him invest funds for them but then lost or spent most of their money.
"I was caught off guard and am seeking legal representation," Heinz said Thursday, declining to comment further.
U.S. District Judge David Sam, acting on a request of the SEC, signed an order Thursday freezing Heinz's assets and prohibiting him from destroying documents. Of the $4 million Heinz took in from investors, only $311,000 is left in his trading accounts, according to the lawsuit.
Heinz used contacts with former clients at other brokerages where he had worked and also his membership in The Church of Jesus Christ of Latter-day Saints to solicit investors, guaranteeing them a fixed rate of return from 6 percent to 120 percent a year, the lawsuit says.
"One investor, the recent widow of a church associate of Heinz, invested with Heinz after he volunteered to assist her with her finances and investments after her spouse died," the complaint alleges.
Some of the money Heinz invested went into high-risk futures contracts that he rapidly traded, losing more $1.5 million since January of 2012, the SEC alleged.
Another $1 million went toward personal expenses, which included paying for a vacation to Mexico for more than 20 family members and repaying a $600,000 loan taken out against a personal life insurance policy more than a decade ago, court documents say.
In addition, the agency alleges some monies from new investors went for payments to more mature ones in what's known as a Ponzi scheme.
Heinz also withdrew about $331,000 in cash from bank accounts in monthly amounts between $9,000 and $10,000, the limit at which banks have to report such activity to federal authorities, court documents say.
The SEC is alleging Heinz violated numerous federal securities laws and is asking that he return any ill-gotten gains and pay an unspecified fine.