SEC Files Action in Fraudulent Promissory Note Offering

The Securities and Exchange Commission, SEC, has filed a civil injunctive in the United States District Court for the District of Colorado against Brian G. Elrod, on September 9, 2013, for allegedly conducting a fraudulent offering of promissory notes which Nova D. Pack acted as an unregistered broker. Elrod and Pack reside in Buffalo Creek, Colorado and Highland, California, according to a press-release on the SEC's website.

The SEC complaint alleges from at March 2009 through November 2009, Elrod and Pack raised approximately $2 million from 12 investors of high-yield promissory notes issued by CFS Holding Company LLC, a Colorado company owned and managed by Elrod. Allegedly, Elrod told investors that their investments were secured and guaranteed and would generate annual returns ranging from 12% to 24%. Also that Elrod told the investors that the proceeds from their promissory notes would be used to expand a group of financial services companies owned and managed by Elrod.

The SEC alleges that the representations were false and misleading, and that Elrod, rather than use investor money for legitimate business purposes, improperly used most of the investor funds to make substantial payments to himself and family members and to pay for personal expenses, to pay Pack significant commissions for referring investors, and to make interest payments back to investors. The CFS note offering was not registered with the SEC, and Pack was not an associated person of a registered broker or dealer at the time he participated in the CFS note offering.

Without admitting or denying the SEC’s allegations, Elrod and Pack agreed to settle the case against them. Elrod consented to the entry of a final judgment requiring him to pay disgorgement of $1,720,491, plus prejudgment interest of $295,817, and a civil penalty of $1,720,491. Pack consented to the entry of a final judgment permanently of $171,500 plus prejudgment interest of $25,177, but waiving payment and not imposing a civil penalty based upon his financial condition.

According to FINRA's BrokerCheck, Brian G. Elrod, was previously registered with FINRA at the following brokerage firms:

RAINMAKER SECURITIES, LLC
CRD# 132995
LAKEWOOD, CO
01/2010 - 03/2010

BREWER FINANCIAL SERVICES, LLC
CRD# 132558
LAKEWOOD, CO
01/2008 - 01/2010

IBS SECURITIES, LLC
CRD# 37921
LAKEWOOD, CO
03/2005 - 12/2007