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Victims of cash-advance firm’s alleged securities fraud stand to recover $100 million

Sun Sentinel logoSun Sentinel 9/17/2019 By Marcia Heroux Pounds, South Florida Sun Sentinel

More than 3,600 investors who lost savings to an alleged securities fraud involving a South Florida cash-advance company stand to recover $100 million from a bankruptcy court liquidation, lawyers said Tuesday.

In a related development, federal authorities announced they have charged a Fort Lauderdale lawyer and former outside counsel for 1 Global Capital with securities fraud in the case that affected investors in 42 states.

1 Global Capital promised investors a profit from loans it made to small and midsize companies. But much of the money went to CEO Carl Ruderman’s personal spending and his consumer-loan companies, the Securities and Exchange Commission alleged in a civil complaint filed last year. The commission alleged Ruderman misappropriated $35 million on spending that included a vacation to Greece, a Mercedes-Benz and a personal chef.

Headquartered in Hallandale Beach, 1 Global Capital operated from early 2014 until July 27, 2018, when it filed for bankruptcy. As of that time, Global had raised more than $330 million. Internal documents showed a $50 million cash deficit, the SEC alleged. A federal judge granted an SEC request for an asset freeze against Ruderman, 1 Global Capital and several affiliated companies.

“The SEC’s investigation effectively stopped 1 Global’s offering and prevented further harm to investors and retirement funds,” Eric Bustillo, head of the SEC’s regional office in Miami, said at the time.

Early Tuesday afternoon, U.S. Bankruptcy Judge Raymond B. Ray in Fort Lauderdale was scheduled to hold a hearing to assess a proposed plan that would return a sizable portion of the millions raised by 1 Global Capital.

“Everybody worked together to be able to return as much money as possible to these individuals who had their net worth put into this,” said court-appointed receiver James Cassel of the Miami firm Cassell Salpeter. “It was a sad scenario. We made a lot of progress and collected a lot of money.”

Paul Keenan, a Greenberg Traurig attorney who represents the receiver, said he anticipates the plan will be confirmed by the court this week. “Everyone is supporting the plan,” he said. That includes investors, creditors and the SEC.

Out of the 3,600 people affected, 2,425 investors returned ballots approving the repayment plan, Keenan said. He predicted cash distributions wold take place in early November.

Criminal charges against lawyer

Jan Douglas Atlas, 74, of Fort Lauderdale, is accused of one count of securities fraud, according to a news release. If convicted, Atlas faces a maximum statutory sentence of up to five years in prison and a fine up to $10,000.

Atlas, a long-time South Florida securities lawyer, wrote two opinion letters in 2016 that allegedly contained false information describing how 1 Global Capital investment actually worked and the duration of the investment, which omitted information about its automatic renewal, the U.S. Attorney’s Office said.

On Aug. 23, 1 Global Capital’s chief financial officer Alan Heide entered a guilty plea to one count of conspiracy to commit securities fraud.

The SEC previously charged 1 Global and Ruderman, the CEO, with fraud, and charged Henry J. "Trae Wieniewitz, III, an external sales agent, for his allegedly unlawful sales of 1 Global Securities.

In a statement last month, the commission said Ruderman consented to a final court judgment in which he was permanently barred from violating federal securities laws, and held liable for turning over nearly $32 million in “ill-gotten gains” and paying a $15 million civil penalty. Ruderman also agreed to turn over $750,000 in cash and 50 percent equity in a multi-million dollar condominium.

The commission also said it settled with Wieniewitz in July. According to the same statement, he agreed to a final court judgment holding him and his former company jointly liable for turning over $3.5 million and paying a $150,000 civil penalty.

This is a developing story, so check back for updates. Click here to have breaking news alerts sent directly to your inbox.

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©2019 the Sun Sentinel (Fort Lauderdale, Fla.)

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