Gold Mining Investment Scheme Charged with Making Misleading Statements that Mines Would Yield Millions of Dollars

December 16th, 2014
in econ_news

from the Securities and Exchange Commission

The Securities and Exchange Commission today announced charges against two individuals and their companies behind an alleged gold mining investment scheme based in Miami.

Follow up:

The SEC Enforcement Division alleges that Michael Crow and Alexandre Clug promised investors a stake in so-called “quick-to-production” gold mines that their company Aurum Mining LLC purported to own and operate in Brazil and Peru. Crow, who had filed for personal bankruptcy, teamed up with Clug to raise approximately $3.9 million from seniors and other investors in Florida. Despite highly optimistic statements that the gold mines would yield millions of dollars, the investors never received any money back from their investments.

According to an order instituting an administrative proceeding, Crow and Clug allegedly used a substantial amount of investor funds to cover their monthly salaries, rental of upscale apartments in Lima, and other living or travel expenses.

In a separate order, certified public accountant Angel E. Lana agreed to settle findings that he was involved in the scheme as the CFO of Aurum Mining. Said Andrew M. Calamari, Director of the SEC’s New York Regional Office:

Investors are entitled to know the whole truth about their investments and those controlling their investments. Our case alleges that Crow and Clug used investor money to pay themselves while concealing Crow’s background and Aurum’s failures in Brazil and Peru from investors, including seniors.

The SEC Enforcement Division alleges that Crow and Clug knew their prospective statements to investors about the gold mining ventures were false and misleading because they were not supported by the conclusions or opinions of Brazilian-based counsel, independent geological experts, or mining analysts. Among the false representations by Crow and Clug was that Aurum Mining had acquired a 50-percent interest in a Brazilian gold mine with reserves of approximately $400 million worth of gold.

According to the SEC’s order, Crow has twice before been the subject of SEC enforcement actions and has been barred from working in the securities industry or acting as an officer or director of a public company. The SEC Enforcement Division alleges that Crow and Clug established PanAm Terra Inc. as a public company and raised $400,000 from investors in Florida for purported farmland investment opportunities in South America. PanAm Terra failed to disclose to investors in its periodic SEC filings that Crow acted as a de facto officer despite being barred from doing so. The filings also failed to disclose Crow’s bankruptcy. The SEC Enforcement Division alleges that no farmland was actually purchased and a substantial amount of the money raised was paid to Crow, Clug, and their business associates.

The SEC Enforcement Division further alleges that Crow and Clug operated another company called The Corsair Group through which they brokered the sale of bonds to investors and received more than $10,000 in transaction-based compensation. The Corsair Group was not registered as a broker-dealer and Crow and Clug were not associated with any registered broker-dealer, and in fact Crow had been barred from associating with any broker-dealer.

The SEC Enforcement Division alleges that Crow, Clug, Aurum Mining, and PanAm Terra violated Section 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 under the Securities Exchange Act of 1934. Crow and Clug allegedly aided and abetted and caused the violations by Aurum Mining and PanAm Terra. In the order, the Enforcement Division alleges additional violations of other provisions of the federal securities laws. The matter will be scheduled for a public hearing before an administrative law judge for proceedings to adjudicate the Enforcement Division’s allegations and determine what, if any, remedial actions are appropriate.

The SEC’s separate order against Lana found that he solicited his own accounting clients and others to invest in Aurum Mining without regard to the false or misleading representations being made to investors. Without admitting or denying the findings, Lana agreed to pay a $50,000 penalty and be barred from practicing as an accountant on behalf of any SEC-regulated entity for five years. He is ordered to cease-and-desist from further violations of Section 17(a) of the Securities Act.

The SEC Enforcement Division’s investigation was conducted by Ibrahim Bah, Nandy Celamy, Sandra Yanez, David Stoelting, and Valerie A. Szczepanik in the New York Regional Office. The case was supervised by Amelia A. Cottrell, and the Enforcement Division’s litigation will be led by Mr. Stoelting and Mr. Bah.

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