SEC Charges Five Cay Clubs Resorts and Marinas Executives in $300 Million Ponzi Scheme

SEC v. Barry J. Graham, Fred Davis Clark, Jr., a/k/a Dave Clark, Cristal R. Coleman, a/k/a Cristal Clark, David W. Schwarz, Ricky Lynn Stokes, Case No. 4:13-cv-10011 (S. D. Fl.).  On January 30, 2013, the SEC announced fraud charges against Fred Davis Clark, Jr., Cristal R. Coleman, David W. Schwarz, Barry J. Graham and Ricky Lynn Stokes, all of whom are former executives of the Cay Clubs Resorts and Marinas.  The SEC alleges that Defendants were involved in a multi-year scheme to defraud investors who purchased units at Cay Clubs’ resort locations.  Defendants, directly and through sales agents, touted the profitability of the investments by promising immediate income from a guaranteed 15% return.  Investors were also promised, among other things, instant equity in undervalued properties, the development of a network of luxury destination resorts, and a future income stream through the rental program Cay Clubs managed.  Defendants used a complicated network of businesses and bank accounts to hide a Ponzi scheme that commingled investors’ funds and used new investor deposits to pay returns to earlier investors.  The Defendants paid themselves salaries and commissions in excess of $30 million.  Additionally, some Defendants misappropriated millions of dollars to buy airplanes, boats, and to fund other business ventures.

The SEC’s complaint charges Clark, Coleman, Graham, and Stokes with violating Sections  5(a), 5(c) and 17(a) of the Securities Act, and Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5.  The SEC’s complaint also alleges that Graham and Stokes violated Section 15(a)(1) of the Exchange Act, and that Schwarz violated Section 17(a)(1) and 17(a)(3) of the Securities Act and Section 10(b) and Rule 10b-5(a) and (c) of the Exchange Act. The SEC seeks disgorgement plus prejudgment interest, injunctive relief, an accounting, civil monetary penalties, and an order to repatriate assets.

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