DETROIT -- The following is a message from the OFIR:
The Office of Financial and Insurance Regulation (OFIR) announced today that it has put an end to a Detroit-based $1.9 million dollar Ponzi scheme. OFIR investigators found that Martin Royster, through his company Royster, Carberry, Goldman & Associates, Inc. (RCG, was the ringleader of a scheme that preyed on investors by promising outrageous returns – up to 240% annually – in a fraudulent oil investment program.
OFIR’s investigation found that Royster, his wife April Royster, Toine Murphy, Lloyd Banks, III, Shannon Steel and RCG violated the state’s Uniform Securities Act and the agency ordered them to cease and desist from the sale of unregistered securities products. All of the above individuals either worked for or were affiliated with RCG.
Subpoenaed bank records show that Royster, through RCG, deposited approximately $1.9 million of investor proceeds into bank accounts he controlled and as in all Ponzi schemes, a portion of the funds went back to investors as an alleged return on investment. OFIR has information that the remaining funds were transferred to the Roysters’ personal account where the money was used to fund travel, shopping sprees and regular visits to adult entertainment establishments.
“Our investigation found that Royster spent his client’s money in strip bars, on lavish trips and designer clothes,” OFIR Commissioner Ken Ross said. “Consumers are reminded to call OFIR toll free – before investing – to make sure an investment product is registered.”
From 2004 through 2007, Royster was registered with OFIR as being a securities agent associated with RM Stark, a registered broker-dealer firm. During this time, Royster, without notifying his employing broker-dealer, RM Stark, induced investors to purchase fraudulent securities offerings that were not recorded on RM’s records. Specifically, OFIR found that in 2007, Royster, through RCG, solicited fraudulent oil future contracts where investors were not given financial statements, risk disclosures, or certain other related disclosures. The investors were not told that their investment money would be used to pay the Royster’s personal or business expenses, or that the money would be used in Ponzi style to make principal or interest payments due to earlier investors.
In 2007, Royster was terminated from RM Stark due to conducting outside business activities.
OFIR’s investigation found that Royster, through RCG and the fraudulent oil investment program, continued engaging in unlicensed, unregistered investment and securities transactions with the general public. RCG continued to send out bogus monthly account statements to investors reflecting that principal investments were earning returns.
Violations of the Uniform Securities Act may subject Royster to a criminal penalty of up to $25,000 for each violation and 10 years in prison.
OFIR has handed the results of its investigation over to the Michigan Attorney General’s office.
If consumers think they may be a victim of Royster’s Ponzi scheme, they are asked to contact OFIR toll-free at (877) 999-6442.
OFIR’s investigation found that Royster’s investment offering should have raised a number of red flags for consumers, which included:
- Promises of outrageous returns on investment – (20% monthly, 240% annually).
- Investors received no financial statements, risk disclosures or other disclosures that would have been material to a reasonable investor before investing.
- Royster provided no documentation that the investment products were registered with the state.
Before entering into an investment, Michigan consumers are encouraged to contact OFIR and the agency can run a check on any investment firm, professional or product. OFIR can be reached at (877) 999-6442 or online at: www.michigan.gov/ofir.
To view OFIR’s cease and desist order, visit: http://www.michigan.gov/documents/dleg/RoysterCD_324317_7.pdf
