For Release: May 2, 2008
U.S. Commodity Futures Trading Commission Obtains Federal Court Order Freezing Assets of California-based Safevest LLC
Defendants from California, Virginia, and Washington, DC Charged with Defrauding Investors of More Than $25 Million in Ponzi Scam Involving Commodities
Washington, DC — The U.S. Commodity Futures Trading Commission (CFTC) announced today that it obtained a federal court order in Santa Ana, California, against defendants Safevest LLC, located in Mission Viejo, California, and its owners and officers, Jon G. Ervin of Laguna Hills, California and John V. Slye of Herndon, Virginia, freezing the defendants’ assets, prohibiting the destruction of documents, and appointing a temporary receiver.
Slye, the purported founder, president and CEO of Safevest, represents that he is an ordained minister and the pastor of a church in Washington, DC, in addition to being a founder and former member of the board of directors of the National Foundation for Cancer Research.
The court’s order, entered on May 1, 2008, in the U.S. District Court for the Central District of California, arises from a CFTC complaint filed on the same day alleging that defendants solicited more than 500 members of the public to transfer more than $25.7 million in funds to participate in an illegal commodity pool. Contrary to their representations, defendants did not deposit customer funds into an account for trading commodity futures and misappropriated virtually all customer funds.
The complaint also charges that since at least May 2007, Safevest fraudulently solicited members of the public through a multi-level marketing scheme to purchase interests in a purported commodity pool that traded exchange-traded commodity futures contracts. The complaint further alleges that Safevest misrepresented to clients that the firm used computerized trading software that consistently produced daily profits between 1.6 percent and 1.9 percent.
Misappropriation Included $18.5 Million Ponzi Scheme
According to the allegations in the complaint, defendants deposited client funds into bank accounts controlled by Safevest and misappropriated those funds. In addition to using client funds to pay their personal expenses, the complaint alleges, defendants misappropriated funds by using funds from some pool participants totaling at least $18.5 million to pay off other pool participants in a manner characteristic of a Ponzi scheme.
Specifically, the complaint alleges that pool participants funds deposited in Safevest bank accounts were used to pay $282,500 to Mission Loans, Inc., a corporate entity partially owned by Ervin and of which he is president; $120,452 to Ervin and his family members; $259,500 to Slye and his wife; and approximately $170,000 for check card and ATM debits.
The CFTC complaint also alleges that defendants are liable for Safevest’s failure to register with the CFTC as a commodity pool operator, and that Safevest and Ervin are liable for Ervin’s conduct as an unregistered associated person of a commodity pool operator. Finally, the complaint charges both Ervin and Slye with liability for Safevest’s fraudulent conduct as controlling persons of the firm.
In its continuing litigation against Safevest, the CFTC is seeking preliminary and permanent injunctive relief, the return of funds to defrauded customers, the repayment of ill-gotten gains, and civil monetary penalties for each violation of the Commodity Exchange Act.
The CFTC appreciates the assistance of the Los Angeles Office of the Securities and Exchange Commission, the United States Attorney’s Office for the Central District of California, and the Federal Bureau of Investigation in this matter.
The following CFTC Division of Enforcement staff members are responsible for this case: Peter M. Haas, Richard P. Foelber, Kyong J. Koh, Paul G. Hayeck, and Joan Manley.
Last Updated: May 2, 2008