The Securities and Exchange Commission charged a Miami, Florida man and his firm with operating a fraudulent scheme targeting the Serbian-American community, Financial Advisor reports.
Pannon Investment Advisors LLC and its Chief Executive Officer, Dusan Varga, were accused of fraudulently raising money from investors through an unregistered securities offering.
In its complaint, the SEC alleged that from May 2020 through approximately January 2024, Varga and Pannon raised at least $1.6 million from at least 20 investors to invest in the Pannon Risk-Managed Income Fund by making repeated misrepresentations and selling unregistered securities. Most of the investors are members of the Serbian-American community in Miami and southern Florida, and the case is part of the Miami Regional Office’s Fraud Against Minority Groups Initiative.
The alleged misrepresentations included Varga’s and Pannon’s use of investor funds, the profitability of the Pannon Fund’s trading activities, Varga’s background as a purported registered representative of a broker-dealer, and the risks of investing in the Pannon Fund.
Furthermore, Varga and Pannon made Ponzi-like payments to investors, misused and misappropriated investor funds, and otherwise engaged in a variety of conduct which operated as a fraud and deceit on investors, the SEC said.
According to the complaint filed in the United States District Court for the Southern District of Florida, the defendants misrepresented that the Pannon Fund traded covered stock options to generate high income while managing downside risk, while promising investors fixed returns in the form of dividends of 3% or 4% a month.
Varga, who holds dual Serbian and Canadian citizenships, allegedly claimed the investments were making money when, in fact, he was using the money from new investors to pay other investors. He co-mingled investors’ money with his personal funds and used some of investors’ money to support his personal lifestyle, according to the SEC. The scheme unraveled during the last quarter of 2023, when Varga and Pannon stopped making dividend payments to investors.
Varga and Pannon are charged with violating Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) and Rule 206(4)-8 thereunder of the Investment Advisers Act of 1940.
Varga and Pannon did not admit or deny the allegations, but consented to be permanently enjoined from violating Sections 5(a), 5(c), and 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) and Rule 206(4)-8 thereunder of the Advisers Act.
The final judgment also would impose an officer and director bar against Varga, and order Varga and Pannon to pay disgorgement plus prejudgment interest and civil penalties in amounts to be determined by the court at a later date.
Varga could not be reached for comment.
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