According to a suit filed May 24 by the SEC, John A. Geringer, 47, the manager of Scotts Valley-based GLR Growth Fund, raised more than $60 million since 2005, mostly from investors in the Santa Cruz County area.
Geringer — who also controlled GLR Capital Management, GLR Advisors and Geringer, Luck & Rode with two business partners who were not named in the suit — is accused of using false and misleading marketing materials that lured investors into believing that the investment fund was earning returns of 17 to 25 percent each year beginning in 2001.
According to the SEC, the marketing materials claimed that the fund was tied to stock indices such as the S&P 500, NASDAQ and Dow Jones, as well as oil-, natural gas- and technology-related companies.
The SEC claims that, instead, Geringer consistently lost money while trading in securities, and that GLR Growth Fund lost money from 2005 until it stopped trading publicly traded securities in 2009. From mid-2009 to December 2011, Geringer invested at least $29 million in two private startup companies.
When some investors withdrew their investments, Geringer allegedly paid them profits based on false gains with money he received from other investors — a practice resembling a Ponzi scheme, according to the SEC.
“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” said Marc Fagel, the director of the SEC’s San Francisco office, in a prepared statement. “The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid companies, and lied about it in phony account statements.”
The SEC reports that the majority of the $60 million Geringer took in was invested in two technology startups; used to pay other investors; or turned over to three businesses controlled by Geringer.
Throughout 2005 to 2011, he created false documentation claiming gains, the SEC claims.
The SEC complaint also alleges that Geringer and the three businesses he controlled repeatedly violated the Exchange Act and Advisors Act by lying to investors, claiming financial statements had been audited and violating anti-fraud provisions in the laws, among other charges.
All accounts related to Geringer’s businesses have been frozen, and the SEC has requested that all funds be surrendered with interest and pay civil penalties related to the charges. An SEC spokesperson declined to state the number of investors, how much remains in the fund, or how the fraud was exposed.
The case, which was filed May 24, will be heard in the San Jose Division of the United States District Court, Northern District of California.
Geringer has 21 days from May 24 to respond to the complaint.
The SEC stated that an investigation is still continuing and thanked the U.S. Attorney’s Office, Federal Bureau of Investigation and FINRA for their help.
Geringer’s Scotts Valley Drive office was closed this week.
Geringer was contacted through an acquaintance and declined to comment at this time.