red flags

Posted by Mark Pugsley.

There is a relatively new SEC case that definitely needs to be added to my growing list of Utah affinity fraud schemes. On February 11, 2015, the Salt Lake City office of the U.S. Securities and Exchange Commission filed a lawsuit and obtained a temporary restraining order against Roger S. Bliss of Bountiful Utah.

This case has all of the hallmarks of a fraudulent scheme, but unfortunately a number of Bountiful residents (probably many were his ward members) lost their retirement savings because they failed to see – or worse ignored – all the red flags.

The SEC Complaint alleges that Mr. Bliss operated an “investment club” out of his large Bountiful home. Members of the “club” would contribute funds for Bliss to day-trade Apple (AAPL) stock for what he represented to be huge profits.

Bliss allegedly told his friends and neighbors that he had an excellent trading record and had never lost money in the last six years [red flag]. Bliss told interested investors that he had achieved annual returns of between 100 to 300% [red flag], and claimed to be managing in excess of$300 million, $260 of which was his own money. Bliss also claimed there is no risk for investors [red flag], and guaranteed they would not lose their principal investment [red flag].

He told people that he taught investment seminars and traded for his own account for about a year until he felt comfortable enough with his proficiency and results to trade with his friends’ money. And what a great friend he turned out to be…

He called his scheme an investment club (purportedly after consulting with an attorney) because he wanted to avoid being registered as a stock broker or investment advisor. This is a big red flag — anyone who claims he or she can buy and sell securities on your behalf without being licensed and regulated by FINRA or the SEC is clearly violating the law.

According to the complaint, Bliss represented to investors and potential investors that when he traded their money he would take “50% of the upside” so that earnings on their investment are split. The remaining 50% of profits were to be shared among investment club members, based on their percentage of equity in the club. So even after the 50% split, Bliss promised investors would earn at least a 100% return on their investment because Bliss he was actually earning a 200% to 600% total annual return on his trading activities [huge red flag]. He told investors that his average profits were about $920,000 per day, and that he was averaging profits of over $2 million per day during 2015 in his investment club. [red flag]

Of course none of this was true. According to brokerage records obtained by the SEC, Bliss lost $3,299,689 over the last three years of trading, and much of the money he received from his “club members” never even made it to his brokerage account. The ending balance on his December 31, 2014 brokerage statement was just $32,362 — far less than the $300 million he told people he was managing in the “investment pool.”

Of course he could not show people the real trading records, so the SEC alleges that he created fake trading records and account statements that showed successful trading. Bliss provided a fake account statement to one investor that showed a balance of over $85 million in the account. The statement showed a profit of over $4.9 million for the first 5 trading days of 2015.

So the question is WHY.  Why would so many good trusting people give this man their hard-earned money when the claims he was making were so obviously too good to be true?  Why did these people fail to consult with authorities such as the Utah Division of Securities or the SEC to find out whether his scheme was a scam?

I think the answer is simple: Greed. People get so excited about the prospect of outrageous profits like the ones promised by the ironically named Mr. Bliss that they jump in head first without researching the investment opportunity. And people in this state are far too trusting. Just because someone shares your religion does NOT mean they can be trusted with your money. Research the investment opportunity carefully and remember that if it seems to good to be true (such as 200% to 600% annual returns) it almost always is.

If you are a victim of Mr. Bliss’s scam please feel free to share your story anonymously in the comments below.

Copyright 2015 by Mark W. Pugsley. All rights reserved.

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