DALLAS (AP) - A money manager for college basketball coaches who committed suicide last month was part of a scheme that defrauded more than 100 investors of $39 million through the sale of bogus corporate bonds, the Securities and Exchange Commission alleged in a lawsuit Monday.
The suit, filed in U.S. District Court in Houston, targets the estate of David Salinas and asks that it and other defendants give up funds and benefits they allegedly obtained illegally through the bond scheme and another involving two private funds. The SEC also is seeking an undetermined amount in penalties.
A brief filed with the lawsuit asks the court to freeze the estate’s assets and those of other companies. It also seeks the appointment of a receiver to distribute assets to defrauded investors.
Salinas, 60, was found dead of a gunshot wound in his home in the Houston suburb of Friendswood on July 17.
The death has shined a light on how dozens of high-profile college basketball coaches invested millions through Salinas, who also operated an AAU basketball program for highly-recruited high school players. According to SI.com, more than a dozen coaches are believed to have lost more than $7.8 million.
The SEC suit alleges that Bjork and Salinas engaged in a seven-year scheme in which they sold corporate bonds to investors that “in reality” were bogus. Investors were promised yields of up to 9 percent and were provided account statements for the nonexistent bonds, the suit states.
“Their misrepresentations were material to investors, who would not have invested their money had the true facts been known _ namely that the investments were a sham and the defendants were misappropriating their money,” the SEC’s brief states.
The SEC also contends that Bjork raised an additional $13 million from at least 52 investors for two private funds that made improper loans totaling $3.4 million to affiliated parties, including some controlled by Salinas. Investors were told the funds would be used to build a commercial loan portfolio and were never informed of the related-party transactions, according to the suit.
The Texas securities board seeks the revocation of Bjork’s license on several grounds, including the alleged bond scheme.
Bjork “knew or was reckless in not knowing” that the bonds were never purchased, and his misrepresentations constitute a “fraudulent business practice,” the board’s filing states. The document also cites Bjork’s involvement in the creation of the two private investment funds that allegedly made improper loans to affiliated parties.
Bjork’s attorney, Matt Hennessey of Houston, did not respond to a phone message from The Associated Press.
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