The opinion of the court was delivered by: Schiller, J.
The Securities and Exchange Commission brings this action against Robert Stinson, Jr. and a number of entities associated with him. Defendants, proceeding pro se in this matter, have not responded to the SEC's Complaint. Two months after the Clerk of Court entered default against Defendants, the SEC filed the motion for partial summary judgment presently before the Court. The SEC also requests a permanent injunction barring Defendants from committing future violations of federal securities laws. Defendants have not responded to this motion. The Court will grant the motion for the reasons stated below.
A. Stinson and the Life's Good Funds
Robert Stinson, Jr. is an officer of the "Life's Good Funds," six corporations organized in various states between 2005 and 2009: (1) Life's Good, Inc.; (2) Keystone State Capital Corporation; (3) Life's Good STABL Mortgage Fund, Inc.; (4) Life's Good Capital Growth Fund, LLC; (5) Life's Good High Yield Mortgage Fund, LLC; and (6) IA Capital Fund, LLC. (Pl.'s Mot. for Partial Summ. J. Ex. 3, June, 29, 2010 Decl. of Daniel Koster [June 2010 Koster Decl.] ¶¶ 11-18.) Defendants claimed to generate income through real estate investments. (See, e.g., id. ¶¶ 21, 31, 39.) They sold "units" of the Life's Good Funds, charging between $2,000 to $5,000 per "unit." (Id. ¶ 31.)
An SEC investigation revealed that Defendants solicited investments in the Life's Good Funds between 2006 and 2010, obtaining over $17 million from over 262 investors. (Pl.'s Mot. for Partial Summ. J. Ex. 2, Sept. 8, 2010 Decl. of Daniel Koster ¶ 5.) Defendants contacted potential investors via e-mail, the Internet, and phone calls. (See, e.g., June 2010 Koster Decl. ¶¶ 12, 27, 37-38, 47.) In their promotional material, Defendants represented that the Life's Good Funds reliably produced returns of 14 to 16 percent through real estate investments, including loan-fee and interest income from the sale of investment properties, and from foreclosure sales. (Id. ¶¶ 42, 47.)
The SEC discovered that neither Stinson nor the Life's Good Funds held any significant real estate assets. (Id. ¶ 20.) Nor had Stinson or the Life's Good Funds ever registered as or associated with a broker-dealer or investment advisor. (Id ¶ 19.) An SEC records search also revealed that the Commission never received registration statements for the Life's Good Funds. (Id.; Pl.'s Mot. for Partial Summ. J. Ex. 4, SEC Registration Records.)
B. The Life's Good Ponzi Scheme
An SEC accountant, Daniel Koster, analyzed relevant bank records covering activity from April 1, 2009 through May 31, 2010 (the "Transaction Period"). These records demonstrated that the Life's Good Funds used over twenty separate bank accounts; Stinson controlled and was a signatory for each of these accounts. (Id. ¶ 58.) The Life's Good Funds received deposits of investor funds from self-directed IRA accounts. (Id. ¶ 62.) During the Transaction Period, they received at least 150 investments through IRA custodians. (Id. ¶ 64.)
These investments totaled at least $9.2 million. The SEC's investigation revealed that $9,223,083 was then distributed from the Life's Good Funds' accounts. (Id. ¶ 68.) New investments were used to pay periodic "distributions" to other investors. (Id. ¶ 69.) Defendants also used investor funds to pay their expenses. (Id.)
The SEC also discovered large cash distributions to Stinson and his relatives. (Id. ¶ 71.) Investor deposits paid for steakhouse dinners, vacations, and a Mercedes Benz. (Id. ¶ 72.) Stinson also used assets of the Life's Good Funds to pay for his daughter's college tuition and to buy automobiles for his son and daughter-in-law. (Sept. 2010 Koster Decl. ¶ 8.)
The SEC filed its Complaint on June 29, 2010. Defendants subsequently consented to a preliminary injunction freezing their assets. The Court established a Receivership Estate and appointed a Receiver on September 13, 2010. Although their answers or other responses were due on September 23, 2010, Defendants failed to appear, plead, or otherwise defend in this action. The SEC moved for ...