The Texas Securities Commissioner on Dec. 11 entered an Emergency Cease and Desist Order against Clifton Curtis Sneed Jr. of Cedar Hill, whose record includes a conviction on securities fraud charges in 2007 and related sanctions by state and federal regulators for a fraudulent investment scheme.
Sneed uses the alias "Kaisan" Sneed, according to the Order, and operates a purported binary options trading firm called The Joint Venture Group. The Order also names Ivan Dickson, the founder of the Top Money Earners Group (TMEG), a California-based firm. TMEG operates a marketing network for The Joint Venture Group, the Order says.
According to the Emergency Order, an investor pays a one-time membership fee of $20,000 to become a member of the Joint Venture Group and then establishes a trading account insured up to $250,000. Professional traders buy and sell binary options in the investor’s account – activity that Sneed and Dickson guarantee will double an investor's initial opening account deposit will double within 90 days. If not, the Order says, Sneed promises to refund between 100% and 200% of the investor's membership fee.
Sneed and Dickson also represent that an investor's account balance should increase tenfold within one year and that the returns provided to investors should allow them to retire in as little as two years, according to the Order.
To open an account, however, Sneed and Dickson require investors to execute a contract that waives causes of actions based on any inaccurate representation, breach of warranty, or loss of property, among other things. The Texas Securities Act provides that any agreement to waive compliance with securities laws and rules is void.
In addition, the investments in the binary option program are not registered for sale in Texas, and Sneed and Dickson are not registered with the Securities Commissioner.
Binary options are securities in the forms of options contracts whose payout depends on whether an underlying asset -- for example, a company's stock -- increases or decreases above a set price. Binary options are an all-or-nothing proposition: investors do not have the opportunity to buy or sell the underlying asset, and they can lose their entire investment. The Securities and Exchange Commission last year warned investors about other risks in binary options, including possibly unregulated Internet trading platforms; overstating expected returns on investment; refusal to properly credit or reimburse customer accounts; and identify theft.
Although the Joint Venture Group investments depend on the success of options traders, Sneed and Dickson intentionally failed to disclose the identify of the traders or information related to their qualifications, according to the Order.
Nor did they disclose the source of funds that would be used to refund up to 200% of an investor's membership fee or the name of the entity insuring an account up to $250,000.
Sneed has used the first name "Kaisan" to conceal his identity in offering materials and conducting webinars to attract investors, the Order says. Under his actual name, Sneed’s legal history includes material facts that are required by law to be disclosed to investors:
- A U.S. District Court in Dallas entered a final judgment in 2008 in a case the SEC brought against Sneed and other defendants who sold investments in monitors used to display advertisements on vending machines and other devices. The court held that Sneed operated a fraudulent investment scheme and found him liable for the disgorgement of $1.2 million in profits he gained from the scheme.
- The advertising display investments, called “ad toppers,” were also at the center of two actions – one regulatory, one criminal – taken against Sneed in Utah in March 2007. He consented to an order from the Utah Division of Securities in which he admitted misrepresenting the structure and safety of the investment. Sneed also failed to disclose that almost all funds received from new investors were used to pay agent commissions and prior investors.
- Sneed also pleaded guilty in a Salt Lake City criminal court to three counts of securities fraud-related charges and was sentenced to five years probation and ordered to pay restitution plus interest. The amount due currently totals $125,946.
- A lien of $530,323 the Internal Revenue Service placed on Sneed’s property in 2007 remains in effect.