Scores of investors paid more than $500,000 in money-management fees to a Bay Area firm even after it secretly lost their money in fake investment operations called Ponzi schemes, federal regulators allege.
Woodside-based Cornerstone Capital Management sunk up to $15 million of investor funds into a handful of money-losing ventures, including power generation at a Central California grain mill and a Costa Rican currency-exchange scam, according to U.S. Securities and Exchange Commission documents.
In an effort to recover $547,000 in allegedly illegitimate management fees paid by dozens of affected investors to Cornerstone between 2003 and 2007, the SEC on Tuesday commenced civil legal proceedings against the company.
SEC officials in legal filings said the company might not have been initially aware of the “fraudulent nature” of the schemes but it “became aware of substantial evidence demonstrating that the value of the investments was severely impaired” over time.
More than 50 investors were affected.
The SEC said it will try to recover the management fees.