: SEC accuses mother-son team of hyping phony stock-picking supercomputers — named Orwell and Tesla — in alleged investment scam

United States

The Securities and Exchange Commission has moved to shut down what it says is a Ponzi scheme run by a mother and son team who allegedly walked off with more than $ 12 million after selling investors on the idea that they had developed a fool-proof, stock-picking supercomputer.   

Joy Kovar, 86, and her son Brent Kovar, 54, both of Las Vegas, are accused of touting the technological capabilities of their company, Profit Connect Wealth Services Inc., to lure hundreds of investors to tap into their retirement funds and pull equity out of their homes. In return, the company promised guaranteed annual returns of up to 30% plus monthly compounded interest, the SEC said in a civil complaint unsealed on Friday.

Last week, a federal judge in Nevada issued a temporary order barring the company from pursuing more investors and freezing its assets. Court records didn’t list attorneys for the Kovars and they couldn’t be reached for comment. 

In 2010, Brent Kovar was permanently barred by the SEC from serving as an officer in a company or selling securities for his role in a pump-and-dump scheme in Florida involving a phony anti-terrorism business. His mother had also played a role in that company, although she wasn’t charged.

In the more recent case, the SEC says the Kovars began advertising their company in 2018 as able to invest in cryptocurrencies and more traditional securities based on the recommendations of an “artificial intelligence supercomputer.” On its website, Profit Connect said it operated two supercomputers which it called Orwell and Tesla.

As part of the sales pitch, the Kovars allegedly said investors would be given time, or a seat, on the computer to make investment decisions for them, and guaranteed a high rate of return with no fees, and the right to withdraw their funds, penalty-free, at any time. It specifically targeted people looking to build up college funds for their children, the agency charged. 

‘Investors should be wary of individuals and firms who guarantee double-digit returns with no risk of loss.‘

— Michele Wein Layne, director of the SEC’s Los Angeles regional office.

Using promoters on social media, the Kovars allegedly raised more than $ 12 million from at least 277 investors.

“I just really wish all my friends and family, whom I love and care for greatly, would open their minds enough in order to allow themselves to take advantage of this amazing platform!!!!,” the SEC quoted in court filing an unnamed Profit Connect promoter posting on Facebook. “You’re only hurting yourself by ignoring it.”

But investigators say the Kovars never engaged in any kind of investing activity and allegedly used the money instead to finance their lifestyles, buying homes and cars and paying off large credit card bills. In all, investigators say Joy Kovar transferred some $ 1.2 million to her own personal accounts and spent another $ 1.7 million on items for herself.

They also allegedly paid some $ 3 million in commissions to the promoters who had brought in the investors, the SEC said. Some money was also used to pay back investors who had withdrawn from the scheme, in a Ponzi-type fashion, investigators said. Investigators allege that over 90% of the money that was held in Profit Connect’s bank accounts had come directly from investors and wasn’t the result of investments.   

Neither Profit Connect or the Kovars were registered with the SEC to deal in securities.

“The defendants targeted investors who were looking for safe products for their retirements and their children’s educations, offering a money back guarantee on top of the phenomenal results they promised to achieve using a purported ‘supercomputer,’” said Michele Wein Layne, director of the SEC’s Los Angeles regional office. “Investors should be wary of individuals and firms who guarantee double-digit returns with no risk of loss.”

Brent Kovar and one of his brothers had previously faced civil action from the SEC in 2009 in relation to Sky Way Global, LLC, an internet service company that was charged with fraudulently raising millions from investors on the promise that it had built a nationwide network of broadcasting towers and anti-terrorism technology that would allow the government to monitor and, if necessary, take control of an airplane. 

Joy Kovar had served as a company secretary for Sky Way but wasn’t charged in the case.