Letters of credit (L/Cs) have allegedly been used in a Ponzi scheme that the US Securities and Exchange Commission (SEC) says was operated by the CEO of a bogus foreign currency trading company.

The SEC has filed fraud charges against the CEO of First Capital Savings and Loan Ltd, Jeffery Lowrance.

Start-up newspaper

According to the commission, Lowrance duped hundreds of investors into parting with their cash by promising them guaranteed high returns on their investments.

But Lowrance allegedly used the investments to fund the launch of a newspaper called USA Tomorrow and hardly made any of the foreign currency investments that were supposed to have made investors so much money.

L/C guarantees

Investors were promised predictable monthly incomes yielding monthly returns of up to 7.15 per cent through foreign currency trades, according to charges brought by the SEC.

It claims that bogus L/Cs were provided as guarantees to some investors.

The alleged Ponzi scheme was uncovered more than two years ago, but Lowrance subsequently fled to South America before being arrested in the US earlier this year.

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