A company offering allegedly fraudulent and unregistered certificates of deposits under the name Her Majesty’s Credit Union was recently hit with a legal complaint from the SEC.
According to the Nov. 8 complaint filed in the U.S. District Court for the District of Colorado, from 2008 through September 2012, Stanley B. McDuffie, HMCU and its website allegedly targeted investors by offering CDs with above-market rates.
In its recent complaint, the SEC said HMCU is actually the trade name of a for-profit corporation that is controlled by McDuffie.
Instead of investing or loaning CD deposits, the SEC said McDuffie and HMCU deposited investor funds into financial institution accounts held by HMCU, and then allegedly misappropriated the funds for personal and business expenses, causing investors to lose most of their principal and rendering it impossible for HMCU to make required interest payments.
The SEC said McDuffie made misleading statements saying HMCU was a secure credit union that was regulated and that it held insurance covering investor deposits.
McDuffie has several aliases including Stanley Roberson and Stanley Battle, according to the SEC.
The U.S. Virgin Islands-based entity has come under scrutiny from the NCUA and other regulators over the past few years.
In December 2010, a Colorado judge sentenced Roberson to six months in jail for not complying with a subpoena by Colorado officials investigating the credit union's sales of certain securities.
In June 2011, the NCUA prohibited Roberson from any future work at any federally insured financial institution.
HMCU has never been a federally or state-chartered credit union, has never been regulated as a credit union by any government authority, has never held insurance covering its investor deposits, and has never been insured by Lloyd's of London as it has claimed, according to the SEC.
In addition to charging McDuffie with engaging in schemes to defraud and violating sections of the Securities Act, the SEC has also charged him with offering and selling unregistered securities, obtaining money or property on the basis of misleading statements and omission, and making misleading statements and omissions.
The SEC said it is asking the court for relief in the form of a finding that the defendants committed the violations and that unless restrained will continue to do so. The agency has also sought an injunction to permanently restrain and enjoin the defendants from violating the laws as alleged against them in the SEC complaint and order the defendants to disgorge any and all illegal gains and pay civil money penalties, as well as any other relief the court may deem appropriate.