A Spokane Valley businessman is fighting aggressively against federal accusations that he duped investors with claims of huge financial gains and instead spent thousands on vacations, gifts and gambling.
Daniel Peterson, 63, said the charges are nonsense. He said he sold “founder’s stock” to 21 friends and family members to provide startup cash and make them owners of his company, USA Real Estate Fund 1 Inc.
Never once was money solicited from the general public, he said during a telephone interview.
The U.S. Securities and Exchange Commission alleged in a civil fraud suit filed in U.S. District Court in Spokane last week that Peterson told investors that he could raise billions of dollars and that early investors might collect returns of 1,300 percent.
Peterson said the SEC has been provided with copies of letters from each of his investors who are banking on Peterson’s claim that he can leverage new federal legislation called the JOBS Act, intended to help ignite the growth of small business by easing federal regulations and to make it easier for companies to solicit capital from the public.
The SEC has struggled to write the rules for the new legislation, and Peterson said he has been a vocal critic.
“They’re not doing their jobs, and I called them on it,” he said. “I think I made them mad.”
Congress asked that the ban on companies soliciting cash from investors – sometimes called going public – be relaxed by July 2012. The SEC, however, is split on how best to regulate such activity.
Investor advocacy groups fear that allowing businesses to freely solicit cash from the public, including crowd-sourced funding, is an open invitation for fraud.
Supporters say the JOBS Act could help small businesses obtain much-needed investment capital and jump-start business growth.
The SEC complaint against Peterson accuses him of running a scam for personal enrichment. Regulators sought to stop his activity “in its tracks” before other investors lost their money, according to an SEC news release.
Peterson preyed on the patriotism of investors, the SEC says, by saying that their money would be used to bolster American businesses, specifically those that can help the economic recovery of Washington state.
The SEC asks that Peterson return $400,000 to investors and pay fines, saying he used the money to pay for trips and gifts.
Peterson said his investors knew how the money was being spent and supported his endeavors. Investors are united in their support to defend against the SEC and perhaps pursue a lawsuit, he said.