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The Securities and Exchange Commission has obtained a court order halting an alleged $11 million Ponzi scheme in which a Chicago-based promoter who is a convicted felon promised investors high returns from purported investments in payday advance stores.The SEC said that David J. Hernandez, who was convicted in 1998 of wire fraud, sold to investors “guaranteed investment contracts” through his defunct company, Next Step Financial Services Inc. Hernandez promised returns of 10% to 16% per month and made false and misleading statements about his background, the use of investor proceeds and the safety of the investment, the SEC said. Hernandez planned to use investor funds to start a Chicago sports talk Web site called “Chicago Sports Webio” featuring Chicago-area sports figures and reporters, according to the SEC.The SEC’s complaint, filed in U.S. District Court in Chicago, alleged that Hernandez, who lives in Downers Grove, Ill., solicited funds from more than 100 investors in at least 12 different states through Next Step Financial Services from February 2008 until the SEC’s emergency action on June 15. He claimed that investor funds were covered by insurance policies purchased from nationally recognized insurance carriers, the SEC said.According to the SEC’s complaint, Hernandez instead placed investor funds into bank accounts of companies he controlled. From there, Hernandez paid existing investors their promised returns with money from new investors in Ponzi-like fashion. He also transferred investor funds to himself and to his wife to pay off the mortgage on their family home and to purchase cars, jewelry and a piano, the SEC said.The SEC’s complaint charged Hernandez with violating the registration and antifraud provisions of the federal securities laws. The complaint also named as relief defendants Hernandez’s wife and several companies he controlled.–[email protected]

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