[ by Melanie Gretchen ] An investment adviser in Scotts Valley, CA, ran a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred, according to an SEC complaint filed today.  Beginning in 2005, John A. Geringer, manager of the GLR Growth Fund, used false and misleading marketing materials toward convincing investors that the fund was earning double-digit annual returns.  He said he was investing 75% of its assets in investments tied to major stock indices. SEC Findings and Allegations. As his trading generated consistent losses until he finally stopped trading entirely, Geringer paid millions of dollars in "returns" to investors largely by using money received from newer investors to cover his track.  In addition, he sent investors periodic account statements showing fictitious growth in their investments. "Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy.  The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements." -- Marc Fagel, Director of the SEC’s San Francisco Regional Office. Cooking the Books. With investors mostly from the Santa Cruz area, Geringer used fraudulent marketing materials claiming that the fund had between 17 and 25% annual returns in every year of the fund’s operation through investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones.  This included 25% returns in 2001 and 2002 – before the fund's inception in 2003. The marketing materials also falsely showed a nearly 24% return in 2008 from investing mainly in publicly traded securities, options, and commodities, while the S&P 500 Index lost 38.5%. By mid-2009 the fund did not invest in publicly-traded securities at all, Geringer's actual trading had stopped bearing fruit, at which point the fund invested heavily in illiquid investments in 2 private startup technology companies.  He paid the rest of the money to investors in Ponzi-like fashion and to 3 entities that Geringer controlled, also charged in the SEC’s complaint. Fake SEC Approval. Geringer took to account statements that falsely claimed "MEMBER NASD AND SEC APPROVED."  The SEC does not "approve" funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now FINRA).  Geringer also falsely claimed that the fund’s financial statements were audited annually by an independent accountant, when no such audits were performed. For his actions, Geringer and 3 related entities violated or aided and abetted violations of the antifraud provisions of the securities laws as well as a statute that bars people from claiming that the SEC has passed on the merits of a particular investment. SEC Sanctions. Going forward, the SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief.  To date, Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund’s bank account. For further details, go to [SEC, 5/24/12] and the [SEC complaint].