SEC obtains judgment against Katy attorney involved in Ponzi scheme

The SEC has obtained a partial judgment against Christopher K. Brenner, an attorney licensed to practice in Colorado and Texas, who resides in Katy, Texas.

The partial judgement orders that disgorgement of profits, interest and a penalty be imposed, with the amounts to be determined at a later date. Mr Brenner was involved in a business called Atlantic Rim Funding, whose owner is now serving a 20 year jail sentence in California for an unrelated securities fraud.

Basically, Mr Brenner acted as an attorney on behalf of Atlantic Rim. He would approach small business owners who were seeking loans and assure them that if they made a deposit in escrow Atlantic would be able to secure loans ten times the amount deposited. Mr Brenner acted as the escrow agent from September 2011 until March 2012. Prior to that, from December 2010 until August 2011, another attorney, Jay Mac Rust from Stephenville, Tx was the escrow agent. SEC action against Mr Rust continues.

The two attorneys defrauded 29 small business owners who deposited $13.8 million (Mr Brenner raised $3.4 million from 15 clients). According to the SEC, Brenner took $105,000 to pay himself and diverted $490,000 to the owner (Rust allegedly took $224,000 for himself and sent $438,000 to the owner). The defendants used a lot of the funds to trade in speculative securities derivatives. Atlantic never had any intention to obtain the loans. Some of the later deposits taken were used to repay earlier investments so that the collective net loss was about $6 million.

The small business owners were from all over the country, though many were from the Greater Houston area. For instance, Mr Brenner had clients in Houston, Pearland, Spring and Conroe.

Back in 2009, the Colorado Division of Securities won an injunction against Mr Brenner for violations of the state’s Securities Act . He was the CFO of Equity Edge LLC, which was alleged to have misled 57 investors into pumping $10 million into mortgages on used mobile homes. Those charges were later dismissed. (As an aside, the owner of Equity Edge was sued by the SEC in 2015 for fraud in the effective successor company to Equity Edge, conducted between 2010 and 2014).

Prior to Atlantic, Mr Rust was involved in another scam with the now jailed owner. After his involvement with Atlantic finished, Mr Rust went on to create a patent trolling company that targeted small businesses. In November 2014, his company settled with the Federal Trade Commission over charges that they used deceptive sales claims and bogus legal threats.

Clearly the lesson for investors is that you need to perform due diligence before handing over your money. All the players involved had ‘previous’.

 

 

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