Ponzi Scheme Results in SEC Charges for Two Dallas-Based Broker-Dealers

Recently the SEC charged two executives of a medical insurance company with operating a $10 million Ponzi scheme that victimized at least 80 investors.

The SEC alleges that Duncan J. MacDonald and Gloria Solomon solicited investments for Global Corporate Alliance (GCA) by falsely promoting the company as a proven business with strong revenue. In reality, the business had no operating history and virtually no sales.

After starting GCA as an insurance company that would market medical insurance to large groups, MacDonald was unsuccessful in finding an investor to fund the company’s initial capital needs. He and Solomon, who was GCA’s chief administrative officer, began to misrepresent the history of GCA when pitching it to investors. The two claimed that the company had more than 100,000 paying members and fabricated enrollment numbers to make it appear that a substantial amount of new members were joining each month. The company never actually had more than 40 policyholders.

According to the SEC, GCA raised nearly $10 million from deceived investors and returned about $2 million to investors when their Ponzi scheme collapsed. MacDonald and Solomon each took around $1 million of investor funds and spent the rest on business-related expenses until the company’s accounts were left with a negative balance.

“MacDonald and Solomon raised millions of dollars by lying to investors about their company’s business and history and their planned use of investor funds,” said David Woodcock, Director of the SEC’s Fort Worth Regional Office.  “When they could no longer fuel their Ponzi scheme with money from new victims, they told more lies in a failed effort to prevent their scheme from unraveling sooner.”

Along with the SEC’s filed complaint against GCA, the U.S. Attorney’s Office for the Northern District of Texas has filed criminal charges against MacDonald and Solomon.

The SEC is seeking disgorgement of ill-gotten gains with prejudgment interest, financial penalties, and permanent injunctions.