SEC Accuses China Voice Holding Corp. Founder Of Running Ponzi Scheme

NEW YORK - The Securities and Exchange Commission on Friday said it won a court order freezing the assets of China Voice Holding Corp, and accused a co-founder of the telecommunications company of running an $8.6 million Ponzi scheme.

In a lawsuit, the SEC said China Voice, former Chief Executive William Burbank, 52, former Chief Financial Officer David Ronald Allen, 60, and others fraudulently overstated the company's financial condition and business activity in China.

"Since at least 2006, China Voice, Allen, Burbank and others have made false and misleading public statements about China Voice, to maintain the facade of a prosperous company, while masking the unjust enrichment of the principals," the complaint filed in the U.S. district court in Dallas said.

The SEC said the Ponzi scheme involved false promises made to investors by Allen and two accomplices: Alex Dowlatshahi, 36, and Christopher Mills, 34.

According to the regulator, the men promised investors annual returns of least 25 percent with "minimal risk" on investments in at least 16 limited partnerships.

Instead, the SEC said they used money to repay investors in earlier partnerships, fund China Voice and other companies that Allen controls, and enrich themselves and family members.

The SEC also accused shareholders Gerald Patera, 69, and Ilya Drapkin, 34, of helping Allen finance promotions to drive up China Voice's share price, including a "blast fax" campaign, and dumping millions of China Voice shares onto the market.

"This fraud illustrates that when extraordinarily high returns are promised in a supposedly low-risk investment, that's a tell-tale sign that something likely is amiss," said Stephen Cohen, an associate director in the SEC enforcement division, in a statement.

The SEC and other regulators have in recent years spent more resources cracking down on alleged Ponzi schemes after failing to uncover Bernard Madoff's fraud faster.

A China Voice spokesman did not immediately return a call seeking a comment. Calls to Allen's and Burbank's homes were not answered. Patera said "I'm shocked" at the lawsuit. Drapkin was not immediately available for comment. Dowlatshahi and Mills could not be reached.

China Voice is based in Boca Raton, Florida. More than 20 defendants are named in the lawsuit. Several have ties to Texas, where the lawsuit was filed.

The lawsuit seeks to impose civil fines, bar Allen and Burbank from participating in penny stock offerings or serving as corporate officers and directors, and other remedies.

The case is SEC v. Allen et al, U.S. District Court, Northern District of Texas, No. 11-00882.

For the SEC: Jane Peterson, Carolyn Welshhans, David Herman, Jennifer Leete, Toby Galloway and Stephen Cohen.

(Reporting by Jonathan Stempel)

Copyright 2011 Thomson Reuters. Click for Restrictions.

Comments

[jcaunter]

10:54 PM on 04/30/2011

If the SEC is finally ready to start shutting down ponzi schemes, they should start with the Federal Reserve first. After all, why waste time going after the small fry?

[NYCBri]

01:48 PM on 05/02/2011

It isn't what you know that gets you into trouble. Its what you know for sure that just isn't so.

[UtahSlim]

02:30 PM on 04/30/2011

Corporate management making overly optimistic statements to pump up the value of the stock they're selling. I wish they'd applied that logic to Gary Winick (Global Crossing) and Dick Fuld (Lehman Bros) or to the entire management of Glodman Sachs and every other bank.

[loki]

05:35 AM on 04/30/2011

ok, this is a scape goat to quell the masses. China Voice Holdings highest every worth was back in Nov of 2007 when their stock peaked out at almost $2 dollars a share. Since then they have hovered back and forth between 0 and 50 cents. This is a very small, very insignificant company that is being used by the SEC to make people think they are doing something to punish the people who have caused our problems. Sure, CVH might be bad guys, buy they cant even compare to AIG, Golden Sachs, Citi, and so many more of the really big bad ivy greed capitalist who have totally raped us all clean to the bone for fun and huge profits. But you wont see the SEC do a thing to anyone of stature,no matter what the size of the crime or the amount of damage. So, they look for someone small and try to make it sound like its the take down of the century. Potemkin Village of the 21st century.

[lvdragonlady]

10:31 PM on 04/29/2011

NOW, if the SEC will monitor US companies the same as foreign ones, then just maybe these ponzi pushers will be punished for their crimes.

[loki]

05:38 AM on 04/30/2011

Uh, dude, this is a US company. Headquarters in Florida. Everyone involved are US citizens. This is a very , very small fry when it comes to bad guys of the ivy greed capitalist world.

China Voice Holding Corp.
327 Plaza Real
Suite 319
Boca Raton, FL 33432

[JerryAguy]

04:53 PM on 04/29/2011

How long until Al Gore is sued for his massive carbon scheme? maybe when the investors realize that they were duped, I believe it will dwarf Madoff's scheme by far in the massive amounts of money lost by not only the investors but the taxpayers, how much money has gone done his rat hole? I would think it would fall under RICO statutes as well since he had help.

[numbers wonk]

04:49 PM on 04/29/2011

Richard Li, son of Hong Kong billionaire Li Kai-Shing did the same thing with Tom.com back in 2000. But Richard's dad helped bail him out.

[Simple Living]

04:39 PM on 04/29/2011

I wish they would look at Verizon's smoke and mirrors too.

[mstock57]

05:30 PM on 04/29/2011

No kidding. I work for a Verizon spinoff, Frontier, and am worried that it may go the way of Fairpoint and Hawiian Tel.

[Simple Living]

06:13 PM on 04/29/2011

Verizon has many spinoff's. It seems they are doing their best to rid themselves of wireline and rid themselves of the Union. Smoke and mirrors.

[loki]

05:39 AM on 04/30/2011

ATT needs to be not only looked at too, but taken apart like they did before.

[yappnmutt]

02:19 PM on 04/29/2011

pump and dump tiny stock=bad

pump and dump entire market=good.

[sensimilla]

01:28 PM on 04/29/2011

smoke and mirrors...

The real wrongdoer that is destroying middle class families all throughout America is GOLDMAN SACS and their masterful market manipulation and collusion.

[cats530]

12:35 PM on 04/29/2011

Wow! An 8.6 million dollar Ponzi scheme busted.

What about the CDO Ponzi schemes that involved trillions that the SEC turns a blind eye to?

Color me, unimpressed.

[McKeaton]

12:57 PM on 04/29/2011

That 's what Wall St. business is based on....CDO.

[StJames]

02:10 PM on 04/29/2011

Amazing ain't it?  I remember when the purpose of Wall St. firms was to provide capital for companies...