[ by Melanie Gretchen ] The SEC charged 2 individuals in one of the largest-ever Ponzi schemes in South Florida, according to the SEC's complaint filed in federal court in Miami.  From at least July 2008 to October 2009, Fort Lauderdale area residents George Levin and Frank Preve raised more than $157 million from 173 investors in less than 2 years by essentially piggy-backing off another Ponzi schemer, former Florida attorney Scott Rothstein, currently serving a 50-year prison sentence. SEC Findings and Allegations. Levin and Preve used investor funds to purchase discounted legal settlements from Rothstein through his prominent law firm Rothstein Rosenfeldt and Adler PA.  While the 2 men misrepresented to investors that they had procedural safeguards in place to protect investor money, they often purchased settlements without first seeing any legal documents or doing anything to verify that the settlement proceeds were actually in Rothstein's bank accounts – a common practice. Picking a Losing Horse. Though Levin and Preve's settlement purchasing business collapsed with Rothstein's failing Ponzi scheme, Levin and Preve sought new investor money while falsely touting the continued success of their investment strategy.  [CI Note: Did they know that Rothstein was a bad apple, or were they only concerned with the temporary successful returns?] "Levin and Preve fueled Rothstein's Ponzi scheme with the false sense of security they gave investors," said Eric I. Bustillo, Director of the SEC's Miami Regional Office.  "They promised to safeguard investors' assets, but gave Rothstein money with nothing to show for it." The Scheme. Levin and Preve began raising money to purchase Rothstein settlements in 2007 by offering investors short-term promissory notes issued by Levin's company, Banyon 1030-32 LLC.  To raise additional funds from investors, in 2009 they formed a private investment fund called Banyon Income Fund LP that invested exclusively in Rothstein's settlements.  Banyon 1030-32 was the general partner of the fund, and its profit was generated from the amount by which the settlement discounts obtained from Rothstein exceeded the rate of return promised to investors. However, the offering materials for the promissory notes and the private fund contained material misrepresentations and omissions.  By Levin and Preve's misrepresentations, investors understood that prior to any settlement purchase, Banyon 1030-32 would obtain certain documentation about the settlements to ensure the safety of the investments.  Levin and Preve, however, knew or were reckless in not knowing that Banyon 1030-32 often purchased settlements from Rothstein without obtaining any documentation whatsoever. The Cons Keep Coming. In addition, Banyon Income Fund's private placement memorandum misrepresented that the fund would continue the successful business strategy pursued by Banyon 1030-32 during the last 2 and a half years.  Levin and Preve failed to disclose that by the time the Banyon Income Fund offering began in May 2009, Rothstein had already ceased making payments on a majority of the prior settlements Levin and his entities had purchased.  They also failed to inform investors that Levin's ability to recover his prior investments from Rothstein was contingent on his ability to raise at least $100 million of additional funding to purchase more settlements from Rothstein. SEC Sanctions. Going forward, the agency seeks disgorgement of ill gotten gains, financial penalties, and permanent injunctive relief against Levin and Preve to enjoin them from future violations of the federal securities laws. For further details, go to [SEC, 5/22/12] and the [SEC complaint].