The day after federal prosecutors brought charges against Stephen C. Peters, accusing the Raleigh businessman of running an illegal Ponzi scheme, the federal Securities and Exchange Commission charged him, too.
The SEC contends Peters, 44, solicited retirees, many of them elderly, in a scheme through which he diverted $4.4 million of their investments for his own use “on such personal endeavors as remodeling a large farm in North Carolina, purchasing fine art for his home, and constructing a vacation home in Costa Rica.”
Peters, the founder of VisionQuest, was in federal court on Thursday to go before a federal judge for the first time on the 16-count indictment handed up by a grand jury on Wednesday.
He was arrested shortly before the hearing.
The judge asked Peters if he understood the charges – one count of fraud in the sale of unregistered securities, nine counts of wire fraud, four counts of engaging in monetary transactions in criminally derived property and one count of corruptly endeavoring to influence a federal agency – before allowing him to be released while awaiting trial. As a condition of release, the judge restricted Peters’ travel, left in place restraints on his assets and prohibited him from contacting any of the investors he is accused of defrauding.
In the indictments and SEC complaint, investigators contend that Peters sold at least $15 million worth of promissory notes in VisionQuest Capital from 2009 to 2017 primarily to clients at another of Peters’ companies, VisionQuest Wealth Management. That, prosecutors contend, was a conflict of interest.
In exchange for investments, investors were promised 8 percent annually in interest, prosecutors alleged. If the investors agreed to forgo that interest and reinvest, they were promised a 9 percent rate of return, they said.
The SEC alleges Peters’ company sold the notes “while making false statements, including that proceeds would be invested into revenue-producing businesses with neither Peters nor his businesses receiving compensation.” The federal investigators also allege Peters told the investors the VisionQuest Capital notes presented little or no risk of loss and were “guaranteed.”
The SEC contends Peters “spent at least $4.9 million to make Ponzi payments to earlier investors.”
“Many of Peters’ VQ Capital note investors were risk-averse and/or retirees seeking a steady and safe income stream,” the SEC complaint states. “Peters knew the investors' investment objectives and enticed them nonetheless to invest by claiming that the notes offered safety and income.”
Camden, Peters’ attorney, has denied the allegations. Both he and Peters declined to comment outside the courtroom on Thursday.
“As we all know, there are two sides to every story, and Mr. Peters very much looks forward to telling his side through the vigorous defense of this case,” Camden said in an email message on Wednesday.
Peters, according to the SEC complaint, started his investment management business in 2005 with the formation of VisionQuest Management. The business grew slowly in the beginning, the federal investigators say, from $10 million in total assets under management and between 26 and 100 clients as of March 2006, to about $21.5 million in assets under management and the same range of clients as of February 2013.
Rapid growth began some time in 2014 or 2015, the complaint states, after VisionQuest Management began acquiring several other investment advisory businesses. By March 2017, the company reported $192 million in assets under management and 413 clients.
Federal investigator noted in the indictments released on Wednesday that a “luxury vacation home in Costa Rica,” a horse farm in Wake County where he lived, a Cadillac Escalade, properties in Jacksonville and Ferguson, N.C., farm equipment, a gun collection with rifles and pistols, diamond jewelry and more are subject to forfeiture.
That includes three horses named Hugo Boss, a Dutch harness, Cartagena, a white Welsh mare, and Princess.