Federal regulators have accused an Orange County money manager of lying to clients about an investment fund, alleging that investors were told their money would be used to make loans to doctors but that the fund was instead used for loans to a used-car dealership and a mobile-home seller.
The Securities and Exchange Commission, in a civil securities fraud lawsuit filed Thursday in federal court in Los Angeles, said Craig Arsenault, 49, and his Laguna Niguel companies, money management firm Atlas Capital Management and investment fund ACT Global Investments, also misappropriated $1 million from investors in the form of loans to Arsenault and questionable reimbursements to Atlas.
The agency wants Arsenault and his companies to disgorge ill-gotten gains and pay unspecified penalties. The SEC has also asked a judge to order a freeze of Arsenault’s and the companies’ assets.
Arsenault, a resident of Laguna Niguel, did not return a call for comment. An attorney that the SEC said was representing him declined to comment, saying she had not been retained for this case.
Starting in 2012 and continuing into this year, Arsenault raised $5.7 million from Atlas clients for ACT Global, according to the SEC’s complaint. Arsenaul and Atlas told clients that ACT Global would make short-term loans to doctors who needed to buy medical equipment, the SEC alleged. Investors were to receive interest of 1% per month on their investment, according to the suit.
But ACT Global never loaned money to doctors, according to the SEC complaint. Instead, the company made loans to a used-car dealership and a mobile-home retailer, according to Thursday’s court filing. The SEC alleged that after the auto dealership stopped making payments on its loans, ACT forgave the debt in exchange for ownership interest in a parcel of undeveloped land in Oceanside.
The agency also alleged that Arsenault himself borrowed $300,000 from ACT Global and has not repaid any of it.
The SEC further alleged that Arsenault and ACT lied to clients about how their investments were performing. In 2014, ACT brought in no interest income at all but reported interest income of about $82,000 to investors, according to the SEC complaint. In 2015 through this year, the agency alleges ACT brought in some interest income but reported to investors that it had earned much more.