A New York City law firm allegedly aided in a $8.4 million Ponzi scheme which stole money from nearly 30 investors, according to a statement released yesterday (March 27) by the U.S. Securities and Exchange Commission (SEC).
Earlier this week the agency charged Aaron Cain McKnight, a Texas resident who ran three separate investment schemes beginning in 2018, alongside attorney Kevin Miller and his law firm Frost & Miller, which the SEC claimed aided and abetted McKnight’s fraud.
By portraying himself as “an experienced professional controlling financial services firms,” McKnight, 48, allegedly offered investment opportunities that didn’t exist, raising millions of dollars from investors in the process.
The first scheme began in March 2018, when McKnight offered a high-yield investing trading program, which refers to plans offering lucrative returns at little to no risk to the investor, according to the SEC’s complaint filed in Texas federal court. Promising that pooled funds would be used to make multi-million dollar investments, McKnight instead allegedly used the nearly $5.6 million from investors for cash withdrawals, a down payment for his property and to fund a jazz club he partially owned.
“None of the investors received any returns on their investments or their principal investment back, apart from a few Ponzi payments, and at least one investor lost their home,” according to the complaint. McKnight also funnelled more than $2 million through bank accounts associated with Frost & Miller, a law firm which had previously represented McKnight.
Miller, 72, allegedly “blindly followed McKNight’s instructions,” failing to perform due diligence on the transactions his law firm received and distributed, said the SEC. The attorney “knowingly imbued McKnight’s scheme with an air of legitimacy and gave investors a false sense of security, thereby furthering McKnight’s deception.”
According to Miller’s LinkedIn, he has represented companies in corporate and securities matters and has substantial experience in counseling clients on SEC compliance issues. He is also a graduate of George Washington University’s law school and currently resides in New York.
Miller was unaware of the McKnight’s alleged fraud, said Steven Paradise, an attorney representing Miller, in an emailed statement, adding that McKnight misrepresented to funders that Miller’s firm was the escrow agent for investors. “To the contrary, the facts will prove that Frost & Miller was a victim of Mr. McKnight,” he said. “Frost & Miller had no involvement whatsoever in the solicitation of these investments, in directing investors to send money to the law firm, or in the underlying purported transactions.”
A falsified U.N. background
Throughout the scheme, McKnight claimed he was running an investment entities group known as the CGE group, which “had billions in assets under management and an affiliation with the United Nations (U.N.),” according to the SEC’s complaint. He also posed as the Chief Operations Officer of the Global Millennium Development Foundation, a non-profit associated with the U.N., with his LinkedIn account claiming he has worked at the organization since 2015.
In reality, he had no credentials or genuine association with the U.N., said the SEC.
McKnight also allegedly engaged in two other schemes, beginning in April 2019 and Sep. 2021 respectively, which resulted in more than $2.3 million of losses from investors, according to the complaint. Funds obtained for a supposed insurance policy and bond offering were instead allegedly used for a pawn shop repayment, Uber and restaurant fees, and money transfers to friends and family.
Sherry Rebekka Sims, a former friend of McKnight’s, and McKnight’s sister Harmony were additionally named in the complaint for aiding and abetting the fraud. McKnight could not be reached for comment.