The federal courthouse in Knoxville, Tenn. (Photo by Frank Kehren)
A Richmond businessman and two of his local firms were found liable last week in what the SEC called a $7 million fraud and Ponzi scheme.
A jury in Tennessee on Thursday found that Nicholas D. Skaltsounis, along with his firms AIC Inc. and Community Bankers Securities, violated federal securities laws by fraudulently offering and selling promissory notes to at least 74 investors in at least 14 states. The trial began Sept. 23 in Knoxville.
After a five-hour deliberation, the jury’s verdict is one of the final steps in a civil suit filed by the SEC in April 2011. The court will next decide how much the defendants might pay as a result of their liability. The SEC has asked for civil penalties and for the defendants to repay any ill-gotten gains. No criminal charges were filed against any of the defendants.
The SEC’s case charged Skaltsounis, AIC, Community Bankers Securities and other defendants for their roles in the alleged three-year, $7.7 million scheme.
The SEC’s case centered on the idea that certain information, including the true financial state of AIC, was allegedly omitted or misrepresented in the solicitation of investors.
AIC billed itself as a financial services holding company that acquired small broker-dealers such as Community Bankers SEC, CBS Advisors, Waterford Investor Services and Advent Securities. Most of those firms had been headquartered at an office on Boulders View Drive.
The enterprise promised dividends of between 9 percent and 12.5 percent, the SEC’s case alleged, but never turned a profit, as its only source of money to pay previous investors was through the sale of new securities to new investors.
While under investigation in 2010, Skaltsounis and the firms he ran sued Richmond attorney Tom Grant and law firm Troutman Sanders, claiming that bad legal advice led them to engage in what resembled a Ponzi scheme and drew federal scrutiny. Skaltsounis and company sought $45 million in damages for alleged legal malpractice.
That case was tossed out by the Virginia Supreme Court in June 2012.
The penalty phase of the case will likely play out through the first of the year. Both sides will have a chance to make their case for the amount that should be paid. Such cases also typically call for future restrictions on defendants from working in certain facets of the financial industry.
Skaltsounis, now 68, filed in August 2010 for Chapter 7 bankruptcy.
The SEC declined to comment on the verdict.
Skaltsounis and the other defendants were represented by Charlottesville attorney Steve Biss. He did not return calls by press time.
The federal courthouse in Knoxville, Tenn. (Photo by Frank Kehren)
A Richmond businessman and two of his local firms were found liable last week in what the SEC called a $7 million fraud and Ponzi scheme.
A jury in Tennessee on Thursday found that Nicholas D. Skaltsounis, along with his firms AIC Inc. and Community Bankers Securities, violated federal securities laws by fraudulently offering and selling promissory notes to at least 74 investors in at least 14 states. The trial began Sept. 23 in Knoxville.
After a five-hour deliberation, the jury’s verdict is one of the final steps in a civil suit filed by the SEC in April 2011. The court will next decide how much the defendants might pay as a result of their liability. The SEC has asked for civil penalties and for the defendants to repay any ill-gotten gains. No criminal charges were filed against any of the defendants.
The SEC’s case charged Skaltsounis, AIC, Community Bankers Securities and other defendants for their roles in the alleged three-year, $7.7 million scheme.
The SEC’s case centered on the idea that certain information, including the true financial state of AIC, was allegedly omitted or misrepresented in the solicitation of investors.
AIC billed itself as a financial services holding company that acquired small broker-dealers such as Community Bankers SEC, CBS Advisors, Waterford Investor Services and Advent Securities. Most of those firms had been headquartered at an office on Boulders View Drive.
The enterprise promised dividends of between 9 percent and 12.5 percent, the SEC’s case alleged, but never turned a profit, as its only source of money to pay previous investors was through the sale of new securities to new investors.
While under investigation in 2010, Skaltsounis and the firms he ran sued Richmond attorney Tom Grant and law firm Troutman Sanders, claiming that bad legal advice led them to engage in what resembled a Ponzi scheme and drew federal scrutiny. Skaltsounis and company sought $45 million in damages for alleged legal malpractice.
That case was tossed out by the Virginia Supreme Court in June 2012.
The penalty phase of the case will likely play out through the first of the year. Both sides will have a chance to make their case for the amount that should be paid. Such cases also typically call for future restrictions on defendants from working in certain facets of the financial industry.
Skaltsounis, now 68, filed in August 2010 for Chapter 7 bankruptcy.
The SEC declined to comment on the verdict.
Skaltsounis and the other defendants were represented by Charlottesville attorney Steve Biss. He did not return calls by press time.