Investors, News

Computer Guru Gets SEC Asset Freeze

The SEC has very strong enforcement power over those who it believes violated, or are violating, the federal securities laws. Brent Kovar, who has had prior run-ins with the securities law, and his mom, were the subject of an emergency action, a temporary restraining order and asset freeze to halt what the SEC alleges is an ongoing offering fraud by the two, and their company Profit Connect Wealth Services Inc.

According to the SEC’s complaint, which was filed in the U.S. District Court for the District of Nevada and unsealed July 16, since at least May 2018 the defendants have raised investor funds through Profit Connect while assuring investors that their money would be invested in securities trading and cryptocurrencies based on recommendations made by an “artificial intelligence supercomputer.”  As alleged, Profit Connect claims that its supercomputer consistently generates enormous returns, which in turn allows Profit Connect to guarantee investors fixed returns of 20-30 percent per year with monthly compounding interest.  According to the complaint, however, over 90 percent of Profit Connect’s funds came from investors.  The complaint further alleges that the defendants did not use funds received from investors to trade securities, buy cryptocurrencies, or do any of the things that Profit Connect promised its investors it would do with their money.  Instead, the complaint alleges that the defendants misused investor money by, among other things, transferring millions of dollars to Joy Kovar’s personal bank account, paying millions of dollars to promoters, and making Ponzi-like payments to other investors.  The complaint alleges that Profit Connect actively encourages investors to use money from retirement funds and home equity, and targets investors looking to build educational funds for their family.

On July 14, the court granted the SEC emergency relief against the Kovars and Profit Connect, including a temporary restraining order and an order freezing their assets.  A hearing is scheduled for July 26, 2021, to consider, among other things, whether to continue the asset freeze, issue a preliminary injunction, order an accounting, and appoint a receiver over Profit Connect.

The SEC’s complaint charges the defendants with violating the antifraud provisions of the securities laws.  In addition, the complaint charges Joy Kovar as a control person for each of Profit Connect’s violations under the Securities Exchange Act of 1934.  The complaint seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties.

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