The Securities and Exchange Commission has filed civil charges against two Frederick businessmen, accusing them of bilking investors of more than $8 million and using the money to speculate in the gold and silver markets.
The SEC won a temporary restraining order against Larry M. Parrish and Michael E. Zimmerman and related companies, Z-Par Holdings Inc. and Z-Par Investment Fund II LLC, in a Maryland federal court late Thursday.
Since April 2004, the SEC claims, the men collected millions of dollars from investors, including Florida retirees, by promising they would produce "steady, risk-free returns" of between 1 and 5 percent each month for a minimum investment of $250,000. The SEC says the defendants claimed the money would be invested in debt securities issued by "the top 50 banks in the world."
SEC lawyers said the pitch actually involved a type of scheme in which perpetrators often claim investors' funds will be used to purchase and trade "prime bank" financial instruments on clandestine overseas markets generating huge returns. Neither the instruments, nor the markets on which they allegedly trade, exist, according to the SEC.
The defendants described the investments as "safe and secure, yielding high rates of return," according to court papers.
In fact, most of the money in this case was funneled to Capital Ban Corp., a California company, and then was used to make speculative trades in precious metals, regulators said.
SEC lawyer John R. Stark said the agency has frozen about 85 percent of the $8.2 million in assets so far, with the intention of returning it to investors. Stark said the agency's investigation continues.
Defense lawyer D. Christopher Ohly said he is reviewing the allegations.
"Our clients obviously have a very different view," Ohly said.