Miami Heat basketball player and Mitchell native Mike Miller is part of a nationwide group of investors allegedly duped out of a combined $10.5 million in a Ponzi scheme run by a South Dakota man and his New Jersey business partner.
In a complaint filed March 1 by the Securities and Exchange Commission, Randy Hansen, 64, of Sioux Falls, and Vincent Puma, 41, of Morganville, N.J., are accused of luring investors to RAHFCO Hedge Funds, which they allegedly said "traded options and futures on the S&P 500." The SEC claims the two men "misrepresented their trading success" and "misused investor funds to make Ponzi payments to other investors," while, at the same time, allegedly using investor funds for their own purposes.
From 2007 to 2011, Hansen and Puma attracted more than 100 investors and took in approximately $23.5 million in investments, the complaint says.
Miller filed lawsuits last year against Hansen and Puma in an attempt to recover his money.
Miller's complaint, filed in February 2012, says he invested $200,000 with Hansen through RAHFCO. That money was part of a $700,000 loan from RAHFCO to AMB New Generation Data Empowerment, an Illinois-based company, given in 2008.
In 2010, AMB filed for bankruptcy and, Miller's complaint says, Hansen failed to file a proof of claim with the bankruptcy court, which led to a total loss for investors. Miller is seeking damages in an amount to be proven at trial, the complaint says.
In a separate lawsuit filed last August, Miller sought to recover another $1.7 million he invested in RAHFCO in 2010.
Miller's attorney, Scott Abdallah, of Sioux Falls, responded to Daily Republic questions Wednesday by email.
"Fortunately, Mike took steps to protect his investment that other investors didn't take," Abdallah wrote. "As a result, he has already been able to recoup much of his original investment. Our pending lawsuit is intended to hold the defendants accountable for their actions and recover the balance of the investment. We are pleased that the SEC also initiated action against Mr. Hansen and Mr. Puma. We are hopeful that our action, together with the SEC action, will result in additional recovery for all investors."
The SEC's complaint says RAHFCO paid investors $6.1 million in purported trading profits, but earned only about $280,000 in actual profits. At least $5.66 million of the money paid to investors came directly from other new investors.
Puma lied to investors about the hedge funds' returns, the complaint says. Puma allegedly told investors RAHFCO earned more than $9 million from 2007 to 2011, about a 25 percent return, when the actual return was just $280,000, or less than 2 percent.
In the early stages of the scheme, RAHFCO earned enough through new investors to pay earlier investors in a timely fashion, but was unable to keep up with payments as time went on, the complaint says.
"When that occurred, the defendants created numerous explanations and excuses to lull investors," the complaint says. "Eventually, the defendants were unable to meet the redemption requests and the scheme collapsed."
In total, investors in the scheme lost approximately $10.5 million, the SEC says.
"This loss fell disproportionately on investors who invested later in the scheme," the complaint says. " ... Many later investors lost their entire investment."
Hansen received $1.95 million in "claimed investment profits and management fees," while Puma received $1.65 million in "investor money," court documents say.
The SEC is asking for Hansen and Puma to give up "all ill-gotten gains" from the alleged misconduct, plus additional civil penalties and interest. It's also seeking a permanent injunction against the two men to keep them from doing business as unregistered brokers.
Two other men, 42-year-old Anthony Johnson, of New York, and 60-year-old Ward Onsa have already been prosecuted and sentenced to prison time in connection with the scheme, court documents say.
In 2010, Miller signed a five-year, $29 million contract with the Miami Heat, according to basketball-reference.com. Miller's salary this season is $5.8 million. His salary will increase to $6.2 million in the 2013-2014 season, and could increase again to $6.6 million if a one-year option in his contract is exercised for the 2014-2015 season. Miller has been in the NBA since 2001 and has been paid approximately $68.7 million.
Last summer, Miller auctioned off his waterfront home in Miami. The South Florida Business Journal reported Jan. 7 that the sale of Miller's 9,000-square foot, six-bedroom home closed in December at $3.355 million, according to Broward County, Fla., public records. That's more than $2 million less than the $5.4 million Miller paid for the home in 2010.
Miller's attorney, Abdallah, said Miller's losses in the alleged Ponzi scheme are "in no way connected to the sale of Mike's home last summer."
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