July 20, 2021/US SEC
The Securities and Exchange Commission announced that it has filed an emergency action and obtained a temporary restraining order and asset freeze to halt an alleged ongoing offering fraud by Las Vegas-based Profit Connect Wealth Services, Inc., Las Vegas resident Joy I. Kovar and her son, recidivist Brent Kovar, which has raised more than $12 million from at least 277 retail investors.
According to the SEC’s complaint, which was filed in the U.S. District Court for the District of Nevada and unsealed July 16, since at least May 2018 the defendants have raised investor funds through Profit Connect while assuring investors that their money would be invested in securities trading and cryptocurrencies based on recommendations made by an “artificial intelligence supercomputer.” As alleged, Profit Connect claims that its supercomputer consistently generates enormous returns, which in turn allows Profit Connect to guarantee investors fixed returns of 20-30 percent per year with monthly compounding interest. According to the complaint, however, over 90 percent of Profit Connect’s funds came from investors. The complaint further alleges that the defendants did not use funds received from investors to trade securities, buy cryptocurrencies, or do any of the things that Profit Connect promised its investors it would do with their money. Instead, the complaint alleges that the defendants misused investor money by, among other things, transferring millions of dollars to Joy Kovar’s personal bank account, paying millions of dollars to promoters, and making Ponzi-like payments to other investors. The complaint alleges that Profit Connect actively encourages investors to use money from retirement funds and home equity, and targets investors looking to build educational funds for their family.
On July 14, the court granted the SEC emergency relief against the Kovars and Profit Connect, including a temporary restraining order and an order freezing their assets. A hearing is scheduled for July 26, 2021, to consider, among other things, whether to continue the asset freeze, issue a preliminary injunction, order an accounting, and appoint a receiver over Profit Connect.
The SEC’s complaint charges the defendants with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the complaint charges J. Kovar as a control person under Section 20(a) of the Exchange Act for each of Profit Connect’s violations under the Exchange Act. The complaint seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties.
The SEC’s investigation was led by Teri Melson with assistance from Dora Zaldivar, and was supervised by Finola H. Manvelian in the Los Angeles Regional Office. The litigation will be led by Katy Wanner and supervised by Amy J. Longo.
The SEC’s Office of Investor Education and Advocacy encourages investors to review the Investor Alert on Frauds Targeting Main Street Investors and to access the investor protection resources at Investor.gov.
The SEC appreciates the assistance of the Utah Division of Securities.