The SEC has announced fraud charges against a Washington statecompany that it says is misleading investors with claims to raisebillions of investment capital under the Jumpstart Our BusinessStartups Act.

According to the SEC, Daniel F. Peterson and his company USA Real Estate Fund 1allegedly promised investors that they could reap spectacularreturns from an upcoming offering in a secured product backed byprominent financial firms.

Peterson sold common stock in USA Real Estate Fund from November2010 to June 2012 to more than 20 investors in Washington and atleast five other states, according to the SEC's complaint filed infederal court in Spokane, Wash.

In emails and periodic e-newsletters that he used to solicit USAReal Estate Fund investors, Peterson said that he was preparing toraise billions of dollars in a second offering of additionalpreferred securities, which he claimed would be secured and have10-year returns of up to 1,300%.

Peterson claimed that two prominent Wall Street financial firmshad partnered with him to bring his offering to market, and thatthe firms had conducted due diligence on USA Real Estate Fund andwere structuring sales agreements and pricing, the SEC said.

Peterson promised the early investors they would profitmassively once the purported future offering was under way.

However, Peterson's claims were false, according to the SEC. Hehad no guaranteed investment product to offer, the projectedreturns were either fictitious or based on implausible andunsupported analyses, and he has no affiliation with any financialfirm to underwrite his purported future offering, the SECalleged.

Peterson used investor money to pay for his rent, food,entertainment, vacations, and a rented Mercedes Benz SUV, the SECsaid. He also used investor funds on clothing for friends, luggagefor his wife, and expenses at a Las Vegas casino.

“We've brought this court action to stop Peterson's fraud in itstracks before it picks up more steam,” said Michael Dicke,associate director in the SEC's San Francisco regional office. “TheJOBS Act is intended to help small businesses raise capital, not to legalize fraud or giveunscrupulous entrepreneurs a right to make false claims to fleeceinvestors.”

Signed into law on April 5, 2012, by President Obama, the JOBSAct was designed to encourage funding of U.S. small businesses byeasing various securities regulations,

The SEC's complaint charges USA Real Estate Fund and Petersonwith violating the anti-fraud provisions of the federal securitieslaws. The agency is seeking a court order requiring both to returntheir alleged ill-gotten gains, with interest, and pay financialpenalties, the SEC said.

The agency is also seeking a preliminary injunction restrainingUSA Real Estate Fund and Peterson from engaging in conduct thatwould allow them to continue their operation and restraining themfrom further violations of the securities laws.