OLYMPIA, WA - As a result of an enforcement action brought by the Department of Financial Institutions (DFI), checks are going out now to investors who purchased fraudulent investments from Federal Savings, LLC. More than 200 investors in 37 states will receive checks totaling more than $4.77 million including $145,000 of interest.
In January of this year, Federal Savings began raising money by offering investments over the internet promising six month certificates earning an annual percentage rate between 6.25 and 8.85. Investors learned of the investment while searching on the internet for CD rates. They thought that the investment was FDIC insured based upon misleading information on the Federal Savings websites. By March 2007 Federal Savings received over $4.6 million from over 200 investors.
On March 8, 2007, DFI ordered Federal Savings and related parties to stop offering the investment in the state. On March 21, 2007, DFI sued Federal Savings in King County Superior Court to freeze Federal Savings’ bank accounts and to return the money to investors. DFI alleged that Federal Savings was violating the state securities act by offering investments while not being registered and with violating the states securities anti-fraud laws.
“The Federal Savings case was different than most investigations because a bank notified DFI of the matter soon after Federal Savings began offering investments. This enabled DFI to take swift action to freeze the bulk of the funds shortly after investors made their investments,” said Michael Stevenson, Director of DFI’s Securities Division. “This should serve as a reminder that investors need to research any investment decision they make. In this case, if the investor had contacted banking and securities regulators before they invested, they would have learned that Federal Savings was not FDIC insured, was not a depository financial institution, and was not registered to sell securities in the state.”
Brad Williamson, Director of DFI’s Banks Division said, “DFI’s efforts to halt this illegal activity protects Washington’s consumers by halting a marketing practice that was confusing and could have resulted in many individuals obtaining high-risk investments instead of federally insured bank deposits. I am happy that the Division of Banks and the Division of Securities could once again work together to protect Washington’s citizens.”