The Securities and Exchange Commission (SEC) has filed a lawsuit against Dusan Varga and Pannon Investment Advisors LLC.
The SEC complaint, seen by FX News Group, was submitted at the Florida Southern District Court on October 30, 2024.
From May 2020 to at least January 2024, Dusan Varga and his company Pannon Investment Advisors LLC, raised approximately $1.6 million from at least 20 investors, through a series of unregistered and fraudulent offerings.
The defendants solicited investments in securities through investment agreements to invest in the Pannon Risk-Managed Income Fund, a purported investment fund managed by the defendants. Defendants misrepresented that the Pannon Fund traded covered stock options to generate high income while managing downside risk, while promising investors fixed returns in the form of dividends of 3% or 4% a month.
The defendants used a combination of phone calls, text messages, WhatsApp messages, emails, in-person meetings, Zoom meetings, and written documents to solicit investors.
Defendants also solicited investors via a referral program under which they paid referral fees to existing investors for referring new investors to invest in the Pannon Fund, Defendants’ client.
Further, the defendants made numerous material misrepresentations about the use of investor and client funds, the profitability of Pannon’s trading, Varga’s purported background as a registered representative of a broker-dealer, and the safety of investing with the Pannon Fund. For example, Defendants falsely represented to investors that, upon their demand, investors could receive a full return of their principal funds within a few business days and that investors’ principal funds were matched in an escrow account to ensure the liquidity of their investments.
In reality, there was no escrow account, the defendants made Ponzi-like payments to investors, and Varga misappropriated and commingled investor and client funds in his own personal bank and brokerage accounts.
Rather than using investor and client funds to consistently trade covered stock options as promised to investors, Defendants often engaged in riskier, uncovered options trading that ultimately resulted in aggregate trading losses of over $200,000.
The scheme unraveled during the last quarter of 2023, when Varga and Pannon stopped making dividend payments to investors, initially blaming the delay in payment on processing issues with online bill pay services and banks. Despite numerous redemption requests by investors, Varga and Pannon have failed to return investors’ principal funds.
The SEC accuses the defendants of violation of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. §§ 77e(a) and (c) and 77q(a)], and Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. Varga and Pannon also violated Sections 206(1), 206(2), and 206(4) and Rule 206(4)-8 thereunder of the Investment Advisers Act of 1940 (“Advisers Act”) [15 U.S.C. §§ 80b-6(1), (2), and (4) and 17 C.F.R. § 275.206(4)-8)] and breach of the fiduciary duties they owed to their advisory client, the Pannon Fund.
The Commission seeks injunctive relief, as well as disgorgement with prejudgment interest, and civil penalties against the defendants. The Commission also seeks an order imposing an officer and director bar against Varga.