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After months of building and preparing a facility for “biochar” production on Fredonia Mountain, the Securities and Exchange Commission (SEC) charged four individuals tied with the facility for what the Commission calls a $30 million Ponzi scheme.
The SEC filed charges Monday, November 16 against four people and two companies involved in the scheme, in which they allegedly persuaded more than 300 investors, nationwide, to participate in purported environmentally-friendly investment opportunities through Mantria Corporation and Speed of Wealth LLC.
The SEC alleges Wayde and Donna McKelvy, who were previously married and living in the Denver area, particularly targeted elderly investors or those approaching retirement age to finance such “green” initiatives of the Pennsylvania-based Mantria Corporation as a supposed “carbon negative” housing community in rural Tennessee and a “biochar” charcoal substitute made from organic waste.
According to a press release from the SEC, the McKelvys promoted Mantria investment opportunities through their Denver, Colorado-based company, Speed of Wealth LLC. With the help of two other promoters who are Mantria executives, Troy Wragg and Amanda Knorr of Philadelphia, they convinced investors attending seminars or participating in Internet “webinars” to liquidate their traditional investments such as retirement plans and home equity to instead invest in Mantria.
The SEC alleges the “green” representations were laced with bogus claims, and investors were falsely promised enormous returns on their investments, ranging from 17 percent to “hundreds of percent” annually. According to the SEC, Mantria’s environmental initiatives have not generated any significant cash, and any returns paid to investors have been funded almost exclusively from other investors’ contributions.
“These promoters fraudulently exaggerated Mantria’s green initiatives and used high-pressure tactics to convince investors to chase the promise of lucrative returns,” said Don Hoerl, Director of the SEC’s Denver Regional Office. “In reality, the only green these promoters seemed interested in was investors’ money.”
The SEC’s complaint, filed in federal court in Denver, charges Mantria and Speed of Wealth as well as the McKelvys, Wragg and Knorr, and seeks an emergency court order to freeze their assets. The SEC alleges they overstated the scope and success of Mantria’s operations in several ways to solicit investors. For instance, they claimed Mantria was the world’s leading manufacturer and distributor of “biochar” and had multiple facilities producing the product at a rate of 25 tons per day.
According to the SEC, Mantria has never sold any biochar and has just one facility engaged in testing biochar for possible future commercial production.
Furthermore, Mantria’s only source of revenue has been from its resale of vacant lots for its purported residential communities in rural Tennessee, including locations in Sequatchie County. But, those did not generate cash with which to pay investor returns because Mantria provided 100 percent financing for almost all of its vacant lot sales to buyers using other investors’ funds.
The SEC’s complaint states Speed of Wealth has frequently advertised its events through television, radio and print advertising as well as Internet marketing. At seminars and webinars sponsored by Speed of Wealth, Wayde McKelvy, along with Wragg or Knorr, generally conduct a two-part presentation in which they urge investors to liquidate all of their traditional investments, including individual retirement accounts, employer-sponsored 401(k) plans, mutual funds, stocks, bonds, and savings accounts.
McKelvy encouraged investors to borrow as much as possible against home equity, parents’ home equity, and business lines of credit. He allegedly recommended investors use all of their funds to invest in what he described as the “consistent and safe” high-yield securities offered by Speed of Wealth and Mantria.
Wragg or Knorr then, allegedly, described Mantria’s purported operations and corresponding securities being offered and market Speed of Wealth and Mantria securities with high-pressure tactics. They frequently offered short-term incentives and bonuses in various programs to induce investors to “pledge” their investments, or to induce those who have pledged, to send in their money immediately, according to the SEC. During seminars, webinars and conference calls, Wayde McKelvy would call upon past investors to provide testimonials about their receipt of high returns from past programs. The SEC alleges Wragg and McKelvy to have “touted” the safety of Mantria’s securities based on collateral consisting of deeds of trust given to investors on Mantria’s Tennessee rural land holdings.
The complaint states, Wragg even told potential investors because of the valuable collateral, investors may make more money on their investments if Mantria defaults than if Mantria makes the promised payments. The promoters frequently alluded to Mantria’s imminent closing of sales worth hundreds of millions of dollars, initial public offerings of securities that are “sure to come” and “sure to be a very huge Wall Street hit,” or upcoming investments by “Wall Street.”
The SEC alleges Mantria and Speed of Wealth used investor funds to pay returns to other investors in typical Ponzi scheme fashion. Mantria and Speed of Wealth also did not tell investors they kept a significant amount of their funds to pay commissions of 12.5 percent to the McKelvys.
The SEC complaint charges each of the defendants with violating the antifraud and offering registration provisions of the securities laws. The SEC also charged all of the defendants except for Mantria with violating broker-dealer registration requirements. The SEC seeks injunctions, disgorgement and financial penalties from the defendants.
The Commission acknowledges the assistance of the Colorado Department of Regulatory Agencies, Division of Securities, with which the Commission has coordinated its investigation.
For more information about this enforcement action, visit www.sec.gov.
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