Chicago Sports Webio: SEC Accuses Former Mike North Sponsor Of Running Ponzi Scheme

CHICAGO (AP) -- Federal regulators accused the promoter of a Chicago sports talk Web site on Monday of running an $11 million Ponzi scheme.

David J. Hernandez was accused in a civil lawsuit filed by the U.S. Securities and Exchange Commission of promising investors in Next Step Financial Services Inc. returns of 10 percent to 16 percent but paying them with money coming in from new investors.

"Hernandez bilked investors out of funds that he led them to believe were being invested properly and safely," said Merri Jo Gillette, director of the SEC's Chicago regional office. Instead, he was paying them "in Ponzi-like fashion," she said.

She said he was also using the money for personal expenses such as cars, jewelry and a piano, to pay his mortgage and to launch "Chicago Sports Webio," a Web site featuring sports figures and reporters.

Hernandez was not charged with any criminal violations. But the SEC said that in 1998 he had been convicted of wire fraud arising from previous employment at a bank.

Hernandez, of suburban Downers Grove, could not immediately be reached for comment. Federal officials said they did not believe he was represented by an attorney. E-mails sent to addresses believed to be his were not immediately returned.

After the SEC filed its complaint, Judge Samuel Der-Yeghiayan issued an order temporarily barring Hernandez from violating SEC rules and freezing his assets.

The complaint said that beginning in February 2008, Hernandez solicited funds from at least 100 investors in at least 12 states through Next Step Financial Services. It said he misrepresented the company as a successful business that invested in payday loan stores when in fact it was out of business. It also said he lied to investors when he said their investments were insured.

-ASSOCIATED PRESS