October 30, 2020 – Matson Money Responds to Lawsuit
In an email to ClassAction.org, Matson Money provided the following statement in response to the proposed class action detailed on this page:
"As an independent asset management firm built on thoughtful and passive investment options for advisors and their clients, Matson Money has never sold, offered or provided custody for promissory notes, particularly those at the heart of the allegations against Christopher Burns. Like many financial advisors, Mr. Burns used Matson Money as a service provider to invest client capital into our investment funds. At all times, we maintained our fiduciary duty to those assets. Mr. Burns is accused of offering fraudulent peer-to-peer lending opportunities to his clients. Matson Money was not involved in those activities, which are not products that Matson Money offers. They are, by their very nature, outside of the scope of the investment funds we manage.
Suggesting that Matson Money is involved in Mr. Burns’ activities is like suggesting that GM is involved in a bank robbery because it manufactured the robber’s getaway car."
Christopher W. Burns is among the defendants in a proposed class action lawsuit that alleges the missing Atlanta-based financial advisor, entrepreneur and radio host worked with Matson Money, Investus Advisers (aka Dynamic Money LLC), Investus Financial and Peer Connect LLC to orchestrate a Ponzi scheme involving promissory note investments falsely touted as “safe and conservative ‘peer to peer’ investment opportunities.”
The plaintiff, a Georgia resident, alleges in the 38-page lawsuit that she lost approximately $350,000 in retirement savings between January 2018 and September 21, 2020. According to the suit, the plaintiff and roughly 89 others were bilked out of the millions they invested into the defendants’ fraudulent promissory note plan.
“In reality, the promissory notes were sham investments, unregistered securities and part of a Ponzi scheme that, as explained below in greater detail, Defendants used to line their pockets and defraud investors out of millions of dollars,” the lawsuit alleges, claiming proposed class members suffered damages in excess of $5 million, not including interest and costs.
Burns missing as of September 24, lawsuit says
According to the complaint, the Atlanta community was shocked to learn the 37-year-old Burns, who the suit says positioned himself in public as “a charismatic, competent, and trustworthy family man” and hosted The Chris Burns show on 95.5 WSB, was reported missing by his wife on September 24, 2020, the same day he was supposed to provide certain financial documents to the Securities and Exchange Commission.
Since his disappearance, Burns, the founder of defendant Dynamic Money, has been hit with federal mail fraud charges by the United States Department of Justice, and the FBI has issued a warrant for his arrest, the lawsuit says. The case adds that the Georgia Commissioner of Securities issued on October 20 an emergency order to cease and desist against defendants Investus Advisors, doing business as Dynamic Money LLC, and Investus Financial over alleged violations of the Georgia Uniform Securities Act of 2008 related to “a fraudulent scheme and selling unregistered securities, i.e. promissory notes.”
The alleged scam
The lawsuit alleges the crux of the defendants’ scam is that the parties, from at least 2017 through September 2020, illegally raised money from investors by way of what Burns referred to as “peer to peer” lending investment opportunities. Per the suit, Burns, using his radio show and perceived investing expertise, raised investment capital from proposed class members based on the false assurance that defendants Investus Financial and Peer Connect were lending the consumers’ money to third parties in need of operating capital. In exchange for their investments, proposed class members were issued promissory notes by Investus Financial and/or Peer Connect, who assured they would repay the consumers’ principal and interest over a period of time.
According to the lawsuit, however, the promissory notes issued by the defendants were illegal because they amounted to unregistered securities under Georgia law.
As the case tells it, Burns falsely claimed the investments made by proposed class members were “safe and conservative,” in part because they were supposedly assured by the assets of third-party borrowers. In truth, the so-called “peer to peer” investment opportunities were merely a Ponzi scheme the defendants tried to keep above water by continually taking money from new investors to pay interest owed to earlier investors, the lawsuit alleges.
Three days before Burns went missing, he recommended that the plaintiff invest an additional $50,000 into a supposedly new peer-to-peer investment opportunity, claiming the woman would be repaid her principal and interest in one month, the lawsuit says.
The alleged mutually beneficial relationship between Burns and Matson Money
With regard to defendant Matson Money’s alleged role in the scheme, the lawsuit claims the large investment advisory firm, which boasts assets of more than $15 billion, “participated in and profited from” the scheme primarily through its relationship with Burns.
According to the lawsuit, Burns used Matson Money’s proprietary software and marketing materials to “recruit clients…and create uniform financial plans for a fee.” Per the suit, Burns also used Matson Money’s software to “obtain confidential financial information” from proposed class members as a means to gain their trust, allowing him to open investment accounts with Matson.
Burns uniformly recommended to proposed class members that they invest a portion of their portfolios into the illegal promissory notes, the complaint says. The lawsuit alleges Burns “had an exclusive agreement with Matson Money” to refer all his clients to the firm while Burns’ agreements with clients expressly required them to agree to open investment accounts with Matson. Moreover, these investment adviser agreements between proposed class members and Matson Money listed the firm and Investus Advisers as “co-advisors,” allowing the entities to manage investors’ money “with full discretionary authority,” the lawsuit says.
Unbeknownst to investors, Matson Money was contractually required to invest their money in its proprietary mutual funds, and not promissory notes, the lawsuit alleges.
Crucially, although the illegal promissory notes into which investors’ money went were not listed on Matson Money’s account statements, the firm allowed interest, i.e. “false profits,” from the promissory notes to be deposited into proposed class members’ investment accounts, the complaint says. Despite being required to do so, Matson Money did not conduct “adequate due diligence” to identify the source of the funds being received and therefore under the firm’s control, according to the complaint.
“Instead, Matson Money simply invested the illegal proceeds in Matson Money’s proprietary mutual funds and charged Plaintiff and Class Members advisory fees,” the suit asserts.
The lawsuit further alleges Matson Money liquidated proposed class members’ investments in their accounts and transferred the funds out of the accounts to invest in the initial promissory note purchases and additional investments in even more illegal promissory notes.
In all, the complaint charges that “there is no question Matson Money violated its fiduciary duties” to proposed class members given it failed to act in their best interests under Georgia and federal law.
Who does the lawsuit look to cover?
The proposed class action looks to represent all persons and/or entities who are U.S. citizens and clients of Matson Money, Inc. who invested in unregistered promissory notes issued by Peer Connect LLC and/or Investus Financial LLC.
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