Many of his investors were elderly. This was their life savings. We felt particularly pushed to get this case done … and save as much money as we can. —SEC trial attorney Tom Melton
OREM — The U.S. Securities and Exchange Commission has filed a complaint against an Orem man accused of swindling $4 million from his friends, neighbors and members of his church.
The SEC got a tip in early July that Steven B. Heinz was using his investment firm as a front to get "loans" that his 15 to 20 clients were told would be put into a trading program and promising a 6 percent to 120 percent return annually.
Most of the money Heinz had collected since January 2012 was actually being used to support a lavish lifestyle, SEC trial attorney Tom Melton said.
Heinz allegedly used much of the money for personal expenses, like taking his family of 20 on a trip to Mexico (racking up a $120,000 credit card bill), setting up business deals for his children, paying off personal debts and covering household expenses, according to a lawsuit filed Thursday.
Heinz has been ordered to appear in court Aug. 19.
In a "classic Ponzi scheme," Heinz also used new investor money to pay off old investors, Melton said, creating a facade that S.B. Heinz & Associates Inc. was a successful investment firm.
The estimated $1.5 million Heinz actually invested was lost through what Melton called "spectacularly unsuccessful" trading of high-risk futures. The lawsuit indicates Heinz lost in excess of $100,000 in a single day because of his strategy of rapidly buying and selling futures contracts.
"Every day he was trading, generally he was losing money," Melton said.
While the SEC hopes to reclaim what money it can to return to Heinz's investors, "the trading losses we cannot recover, and that money may be lost forever," Melton said.
Heinz is believed to currently have about $500,000 in his accounts, Melton said.
The commission acted quickly to prevent more people from falling victim to the scheme. Heinz had met with potential investors as recently as July 22, Melton said.
"Many of his investors were elderly. This was their life savings," Melton said. "We felt particularly pushed to get this case done and save as much money as we can."
This is Heinz's first brush with the SEC, Melton said. In 2007, he was disciplined by the Utah State Division of Securities. Heinz also holds an insurance license, and in 2009 he was disciplined by the Utah Insurance Office for allegedly urging a client to lie to the state commission.
There were several red flags in the case that Utahns should watch for as they invest, Melton said.
Heinz was vague about what he was going to do with the money, never gave statements or written information to his investors, and he paid returns in cash, often asking his clients to meet him in grocery store parking lots for the handoff, Melton said.
"The most important thing is, even if this is someone you trust because they are a neighbor or a friend, you should still be particularly careful," he said. "Unfortunately, as the investors found in this case, you may be taken advantage of."
As of Thursday, all assets tied to S.B. Heinz & Associates, as well as Heinz and his wife, Susan, had been frozen.
Susan Heinz received large cash payments from her husband each month, the complaint alleges, and she has been named as a relief defendant in the case.
The FBI assisted in the investigation, and Steven Heinz may eventually face criminal charges, Melton said.
The SEC investigation is ongoing, he said, and anyone who believes they were victimized in the scheme can contact the SEC's Salt Lake City office at 801-524-5796.
Calls to Steven Heinz were not immediately returned Thursday.