A United States District Court judge in San Jose has set a March 29 deadline for a Scotts Valley man and the Securities Exchange Commission to settle a $60 million fraud case.
A complaint filed by the SEC on May 24 against John Geringer, a Scotts Valley investment adviser, alleged that he raised more than $60 million from individual investors beginning in 2005 by claiming false gains of 17 to 25 percent, despite actual losses.
When some investors withdrew their investments, the SEC alleged, Geringer paid them dividends with money from other investors, in a manner resembling a Ponzi scheme.
Geringer described the case for the first time in a court document filed Oct. 31. He said in the filing that he became a registered investment adviser in 2003 and he controlled and managed the three defendant companies in the complaint, GLR Capital Management LLC, GLR Advisors LLC and Geringer, Luck and Rode LLC.
Geringer stated in the court document that every investor signed and notarized the GLR Growth Fund LP Agreement that stated that all assets, liquid and illiquid, made up the overall valuation of the fund. He also wrote that the marketing material of the fund had a disclaimer that the way the investments were allocated could change based on market and business conditions.
He then said the money the fund raised was invested in three private technology companies, becoming the majority shareholder of each company.
The first company, MediaTile, was recently sold to a large semiconductor company for $1 million, of which $800,000 was deposited back into the fund. The second company’s assets are being sold, and Geringer wrote that the third company had “a strong valuation and substantial patent value.”
Geringer disclosed that a Scotts Valley-based tech firm— one of the other two companies in which GLR Growth Fund has invested and is the majority shareholder — would be substantially affected by the outcome of the legal proceedings.
The March 29 deadline to settle the complaint was set Nov. 7 by Judge Lucy Koh, who is presiding over the case. If the deadline is not met, the case is scheduled to go to trial beginning Jan. 13, 2014, according to court documents.
The SEC seeks repayment of all profits, called disgorgement, and civil monetary penalties. The judge set a deadline of Dec. 28 to add parties to the complaint. It was unclear as of press time whether there are any other defendants in the case.
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