Ponzi Scheme Tied to Driver Alert Tech Firm
Screen shot from one of InterCore's promotional videos, via YouTube.
There’s no doubt evolving drowsy-driver detection and warning systems hold promise in preventing drowsy driving among fleet drivers. But the Securities and Exchange Commission alleges a Houston-area businessman exploited the lure of such life-saving technology to help attract investors into a $114 million Ponzi scheme.
In August, the SEC filed its case against Frederick Alan Voight in federal court in Houston. He’s charged with defrauding more than 300 investors in multiple offerings of promissory notes issued by two partnerships he owns, F.A. Voight & Associates LP and DayStar Funding LP. According to the SEC, Voight promised investors annual returns as high as 42-percent from loans to small public companies, including startup vehicle safety technology firm InterCore in Delray Beach, Fla.
But most of the funds went to pay earlier investors, the SEC alleges, and about $22 million is still unaccounted for. Voight is based in Richmond, Texas.
According to the SEC’s complaint, Voight raised $13.8 million from clients wishing to invest in deployment of InterCore’s Driver Alertness Detection System (DADS). Beginning in October 2014, Voight allegedly wrote to potential investors about a “tremendous” opportunity to help InterCore install the DADS technology into “several million trucks and buses.” Voight assured investors that InterCore was poised for a level of success that would pay the 30- to 42-percent annual interest rates on the promissory notes “many, many times over.”
“Voight wooed investors with promises of outsized returns and once-in-a-lifetime investment opportunities,” said David L. Peavler, acting regional co-director of the SEC’s Fort Worth regional office. “But, like all Ponzi schemes, we allege that this one collapsed when Voight couldn’t find enough new money to keep up with his false promises.”
The SEC complaint alleges that Voight knew the claims weren’t true because he served on InterCore’s board and was aware that the financially troubled company had no means to pay back the loans.
According to the SEC, Voight used funds from the DADS investors to make Ponzi payments to earlier investors. Some of the money, however, was funneled to InterCore through two of Voight’s partnerships, Rhine Partners LP and Topside Partners LP.
InterCore, in turn, sent the funds to its Montreal-based subsidiary, InterCore Research Canada, where the money “seemingly disappeared,” the SEC said.
By routing funds through Rhine and Topside, Voight garnered benefits, including fees and InterCore stock warrants, which he never disclosed to the DADS investors, the SEC alleged.
The SEC’s complaint charges Voight and DayStar with securities fraud and with conducting unregistered securities offerings. Voight and Daystar, without admitting guilt, agreed to settle the complaint by consenting to permanent injunctions against committing such violations in the future. Additionally, they agreed to asset freezes and other emergency relief, and to pay civil penalties and return investor funds with interest levels ultimately established by a court.
Voight also is barred from serving as a public company officer or director. He’s agreed to never participate in the offer, purchase or sale of any security, except for his own personal account, the SEC said.
The SEC named F.A. Voight & Associates, Rhine, Topside, InterCore, and InterCore Research Canada as relief defendants for the purpose of “recovering any allegedly ill-gotten gains they received from the fraud,” the commission said.
The SEC will litigate its claims against InterCore and InterCore Research. InterCore hasn't yet responded to a request for comment.
The SEC investigation was based out of the Fort Worth Office. Jeff Cohen, Keith Hunter and Jessica Magee conducted the probe.