A Spokane Valley, WA-based firm and its owner have been charged by the Securities and Exchange Commission for misleading investors with claims that they were raising “billions of investment capital” for US businesses under the Jumpstart Our Business Startups Act.

The authority alleges that Daniel Peterson and his company, USA Real Estate Fund 1, promised investors that they could reap “spectacular returns” from an offering in a secured product that was “backed by prominent financial firms.”

“Peterson repeatedly told investors that the 2012 JOBS Act would enable him to raise billions of dollars by advertising the offering to the general public, and produce big profits for early investors,” the SEC said in a statement.

It added: “He preyed upon investors’ sense of patriotism by promising to invest the proceeds of the offering in exclusively American businesses, and help assist in Washington State’s economic recovery.”

The SEC alleges that Peterson used investors’ money for personal expenses, and says he may still be trying to attract investors through seminars and public advertising.

According to a complaint filed in federal court in Spokane, Peterson sold common stock in the USA Real Estate Fund between November 2010 and June 2012, convincing some 20 investors in Washington and at least five other states to invest.

Meanwhile, in emails and e-newsletters, which he was using to solicit USA Real Estate Fund investors, Peterson said he was preparing to raise billions of dollars in a second offering of additional preferred securities. He claimed these would be “secured” and have 10-year returns of up to 1,300 per cent.

Peterson also said “two prominent Wall Street financial firms” had partnered with him in taking his offering to market. He said the firms had conducted due diligence on USA Real Estate Fund and were structuring sales agreements and pricing.   

However, all of these claims were false, the SEC said.

The US authority has charged USA Real Estate Fund and Peterson with violating the anti-fraud provisions of the federal securities laws and is seeking a court order requiring the return of all the alleged ill-gotten gains, plus interest. It also is seeking a preliminary injunction to prevent Peterson and his firm from continuing their scheme, and preventing them from future injunctions of these laws.