Days after retiring, a Utah man learned his nest egg may be gone. The state blames a ‘misuse of investor funds.’

On his first day of retirement, Mike Hallam went on a hike in St. George with his family.

And on the second day, surrounded by three generations of family to celebrate, Hallam learned his retirement savings might be gone.

The news came in a forwarded email from a friend, Mike Anderson. Attached to the email was a 41-page emergency cease and desist letter issued in May by the Utah Division of Securities to Hedgehog Investments and several other associated entities. Hedgehog, a Lehi-based firm that promised returns on investments as high as 49%, and its associates, were never licensed to sell securities, the letter said. All of the money it obtained, the state claims, was obtained illegally.

The whole enterprise, a nesting doll of companies owned by the same people, was a scheme that used new investor money to pay old investor debts and enriched the people in charge, the state alleges in the order.

“The Division’s preliminary analysis of financial records showing misuse of investor funds presents a grave and immediate harm to investors and the investing public,” the order says. “The Division believes that Respondents will continue to illegally solicit investor funds from Utah investors as they continue to promote and offer these illegal investments to the unsuspecting public and will continue to do so if not ordered to cease and desist.”

Officials at the state’s securities division would not comment on an active investigation.

Emails from the U.S. Securities and Exchange Commission to investors and a whistleblower in the case suggest it may also be under federal investigation, but a spokesperson for the SEC said the agency does not comment on “the existence or nonexistence” of a case.

Anderson and Hallam both invested with Hedgehog. Anderson invested roughly $200,000, he told The Salt Lake Tribune. Hallam invested his entire 401k. And while the state investigates, Hallam, Anderson and hundreds of other investors are in limbo and cut off from their money.

“As many of you are aware, there is an ongoing investigation by the Utah Division of Securities related to Hedgehog Investments and Corporate Funding Group (CFG),” Hedgehog said on their website in a post dated June 7. “The Utah Division of Securities has issued a cease-and-desist order that affects our ability to take certain steps, as well as CFG.”

“We look forward to defending ourselves at the appropriate time,” they added. “We have no further information that we can share at this time.”

A ‘sophisticated model’

Anderson said he spoke with Hedgehog CEO Matt Bates over the phone “probably 15 times” and that he met face-to-face with Will Vigil, who managed Hedgehog’s investments as a principal at his own business, Sunnyside Equity Holdings. Vigil was well-dressed and worked in a nice, “swanky” office and at no point did he seem too “sales-y,” Anderson said.

And attorney representing Bates and Vigil’s businesses did not respond to a request from The Tribune to discuss the investigation.

Over the course of roughly 20 conversations, Bates and Vigil convinced Anderson that their investment model was sound, he said.

Investors’ money went into a pool, they explained, according to Anderson, and funds from that pool would be used to invest in “young promising companies” that Bates and Vigil vetted themselves. The pool acted as something like an insurance policy, Anderson was told — even if one business didn’t perform as well as expected, others would perform as well or better. The return on investment — from 20% to up to nearly 50% — was guaranteed, he said.

While he’d heard a “slight whisper” that what Vigil and Bates were offering was “too good to be true,” Anderson said he trusted the men. It seemed like they had tapped into a “niche” that had not yet been met and had already found success in it.

“They explained it in a way I was able to accept,” Anderson said. “It was a really sophisticated model.”

According to the cease and desist order, Bates and Vigil operated seemingly separate but companionable businesses. Bates ran Hedgehog Investments alongside Joshua Bishop. Hedgehog Investments branched into Hedgehog I and Hedgehog II, though all three businesses are registered to the same address and list Bates and Bishop as the principal managers.

Vigil, meanwhile, operated Sunnyside Equity Holdings.

Sunnyside sold its own promissory notes to investors, according to the order, but it also acted as the financial arm of Hedgehog Investments. The state alleges Vigil claimed he had good relationships with big national banks and could use those relationships to help secure funding for businesses that might otherwise get financing.

Bates told the Division of Securities that he and Bishop “do not even lightly vet — or even know the names of — the purported ‘young promising companies,’” the state says in the order. “Instead, Bates admitted Hedgehog Investments simply transfers investor monies to Vigil and trusts that he will use the moneys as claimed.”

The state alleges that instead of using investor money to invest in growing businesses, Vigil was paying off old investor debts and using the rest to enrich himself.

The cease and desist order lists 16 respondents in total.

Until the end, both Anderson and Hallam said they never suspected malfeasance. Anderson was getting monthly statements showing how his money was growing, he said.

Since the order was issued in May, communication with Hedgehog and Sunnyside has halted, Anderson said. Any inquiries have been redirected to an attorney, who said in an email to Anderson — who provided a copy to the Tribune — that the firm has “advised that representatives of the Vigil Entities should not directly engage in discussions” with people about the order. The attorney claims that Vigil Entities have stopped any payments to investors, for now, to avoid violating the order — even though the order only applies to selling new securities.

Scott Gordon, the attorney behind the email, did not respond to The Tribune’s request for comment.

“We understand that certain representatives of the Division have advised members of the public that the order obtained by the Division does not prevent the Vigil Entities from making payments to clients,” the email says. “However, the Division has historically sought to apply Utah’s securities laws as broadly as possible and, given the Division’s allegations in the Petition seeking entry of the order, it is not clear that the Vigil Entities could, in fact, make payments without potentially violating the order. We have been in contact with representatives of the Division regarding this matter and its request for additional information and have sought written guidance from the Division regarding what actions the Vigil Entities could take in compliance with the order. To date, the Division has not provided the requested guidance.”

In a post to their website dated July 8, Hedgehog said, as of the day prior, “our attorneys made an official demand to the attorneys representing Will Vigil and entities through which he conducts business ... for a return of all client funds, including interest accrued on these funds.”

“Our attorneys are further working hard to respond to the Utah Division of Securities and secure the return of all client funds,” they said. “We will keep you updated as things move forward.”

On Monday, Anderson said no money had been returned to investors that he knew of, and “no one expects it.”

‘This happens right here’

The Division of Securities would not comment on an active investigation. But Director Robert Cummings said in an interview with The Tribune that the division takes seriously any claims of securities fraud. The division’s job is to protect investors from harm, without prematurely harming an investment broker.

“If we take action, we have to ensure we provide [respondents] with due process,” Cummings said. “Before we get there, you’re taking months and months of investigation. I can’t think of a scenario where a respondent didn’t know we were investigating.”

Financial crime is especially prevalent in moments of economic uncertainty, said Chip Lyons, securities analyst for the division. When the public markets are volatile, it’s easy for private actors to step in and offer something better — even if it isn’t real.

“You can’t trust the markets, but you can trust Bill, who you go to church with,” Lyons said

It’s also common — and a more serious crime — to prey on people’s retirement funds, Lyons said.

Some financial crime victims don’t report the crime out of a sense of shame or embarrassment, Cummings said. They think they should have known better. But that’s the thing about “scammers,” he said: they’re “very savvy.”

And in Utah, an ingrained politeness can make it hard for people to say no, Cummings said. So the next best thing is to say, “not yet.”

“It doesn’t have to be a permanent ‘no,’” he said. “Just think about it.”

“You shouldn’t be scared, but you absolutely should be cautious,” Cummings said. “If you don’t understand it, you need to take a step back and consider.”

For Anderson, who thought he had done his due diligence, the allegations were a wake-up call. He’s not angry or embarrassed at himself — he’s angry at the people he trusted.

“This happens right here in our communities,” Anderson said. “This is a legitimate local businessman. It’s beyond reproach. There’s no reason someone should be this audacious, this bold, and do it for this long.”

On the third day of what was supposed to be Hallam’s retirement, he started looking for a new job. After 23 years as an engineer at the same company, he said it’s hard to find new work.

“I’m not young enough to get hired anymore,” he said. “[Employers] are looking for somebody that can start small and spend the next 20 years building a career.”

Hallam wakes up with panic attacks, he said, even though he’s found two part-time jobs. He’s taking it day by day, but the pain is chronic.

“The easiest and hardest way to describe it: picture all your dreams,” Hallam told The Tribune. “Travel, thoughts of being able to be out and free. … It’s hard for me to look at social media; hard to see friends who are out enjoying life. Ours is upside-down.”

Shannon Sollitt is a Report for America corps member covering business accountability and sustainability for The Salt Lake Tribune. Your donation to match our RFA grant helps keep her writing stories like this one; please consider making a tax-deductible gift of any amount today by clicking here.