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SEC Orders Former FA, Firms to Pay Nearly $9M Over Ponzi Scheme

By Alex Padalka October 26, 2020

The SEC says in has obtained a final judgment against a California-registered investment adviser representative and his companies accused of running a Ponzi-like scheme, ordering them to pay close to $9 million.

In a complaint filed in May, the regulator accused Paul Horton Smith, Sr., his companies Northstar Communications and Planning Services and his California-registered investment advisory firm eGate, of fleecing at least 35 investors out of more than $5.6 million, according to a litigation release from the SEC. The regulator charged that Smith and Northstar promised investors up to 10.5% in guaranteed annual payments in what they described as “private annuity contracts,” but the more than $5.6 million raised was instead used to pay investor returns in a Ponzi-like manner.

That month, the SEC obtained a temporary restraining order and an asset freeze against Smith and his companies from the U.S. District Court for the Central District of California.

The final judgment obtained last week orders Smith and his companies to pay $4,238,400 in disgorgement of ill-gotten gains and $383,059 in prejudgment interest, while Smith must also pay a $4,238,400 civil penalty, according to the litigation release.

Smith is also awaiting trial for charges in a parallel criminal action by the U.S. Attorney’s Office for the Central District of California, the SEC says.

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