A federal judge shut down a Calabasas company that allegedly told investors their money would be used to operate automated teller machines in popular public places and they would earn a significant share of the profits, securities regulators announced Tuesday.
In a case unsealed Tuesday in federal court in Los Angeles, the U.S. Securities and Exchange Commission obtained an emergency court order to freeze the assets of Nationwide Automated Systems.
The order also resulted in the appointment of a temporary receiver over the company’s assets and the freezing of the assets of the company’s owner, Joel Barry Gillis, and fellow officer Edward Wishner.
“We are attempting to cooperate with the SEC to answer any questions they may have,” said James Spertus, Gillis’ attorney. “The case was just filed and we are taking it very seriously in resolving it in a satisfactory way.”
The SEC contends that NAS raised more than $123 million in the past 18 months by telling investors they could purchase ATMs from the company and then lease them back in return for “rent” of 50 cents per ATM transaction.
Investors were allegedly guaranteed an investment return of at least 20 percent per year in the sale-and-leaseback agreements. However, the vast majority of NAS’ revenue was from new investor funds, and the money was used to pay the promised returns owed to earlier investors, according to the SEC.
NAS does not actually own most of the ATMs it claims to operate, a fact unknown to investors who were contractually forbidden in their agreements from contacting the locations where their ATMs were supposedly located, the SEC alleges.
“Gillis and Wishner engineered a scheme claiming to be operating ATMs across the country that would churn out impressive profits for investors,” alleged Michele Layne, director of the SEC’s Los Angeles regional office. “However, the bulk of the company’s actual revenue comes from new investor funds not ATM operations, so they were really in the business of robbing one investor to pay another.”
According to the SEC’s complaint, filed under seal last month, Gillis, Wishner and their company convinced investors to buy an ATM by paying a flat amount — typically $12,000, but in some cases $19,800.
The company claimed to operate some 31,000 ATMs in high-traffic retail locations like hotels, casinos, and convenience stores largely in the Midwest. However, reports from the company’s third-party ATM servicers only identify 235 ATMs currently serviced for NAS, according to the SEC.
— City Nes Service