Holzhueter Funds Frozen by Federal Judge

August 30, 2017 by Kevin S. Kim, Esq.

In January 2015, Loren Holzhueter, an insurance agent from Watertown charged with securities fraud, had his funds frozen during a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). U.S. District Judge James Peterson issued the order after the SEC had sought it in response to claims that his company was running a $10 million dollar investment scam.

The SEC brought the suit against Holzhueter because it alleges that Holzhueter had been running a Ponzi scheme. However, this isn’t the first time Holzhueter has been in the headlines. In a separate and earlier action, the IRS has sent criminal investigators after Holzhueter, even raiding his office in 2013.

Holzhueter, the owner of ISC Inc., an insurance agency comprised of a dozen offices, flatly denies having done anything wrong.

The terms of the temporary restraining order (TRO) issued by Judge Peterson dictate that Holzhueter may only access up to $4,000 of his funds, but only to cover his necessary and ordinary living expenses. Also, the TRO does not apply to funds Holzhueter receives from Medicare or Social Security.

According to the complaint filed by the SEC, after receiving millions of dollars since January 2008, Holzhueter lied to investors, thus violating their trust. The complaint goes on to allege that Holzhueter assured investors that their money was deposited in an individual, separate investment account at ISC. Holzhueter further assured investors that their funds would be available for withdrawal at any time. He informed them that their money would be properly invested, placed into investment vehicles like Individual Retirement Accounts or mutual funds.

However, the SEC says that Holzhueter failed to make the investments he claimed he had made, instead allowing funding from investors to intermingle with other ISC money. In fact, significant amounts of investor capital were put into maintaining the Ponzi scheme, or even used to help cover regular business expenses, such as payroll. Some investor money even went towards paying down ISC’s preexisting debt. The SEC alleged that members of the Holzhueter family collected more than half a million dollars from accounts that held the investor funds.

According to Holzhueter, all transactions were made using only money legally obtained from clients. Holzhueter insists that many of his customers were personal friends. Holzhueter’s attorney, Stephen Kravit, stated that the individuals who gave Holzhueter the money in question were not investors, but merely lenders and that he was working to pay them back. Kravit iterated that the continued operation of ISC would be “in the best interest of all parties,” and that its continued operation was legal under the terms of the TRO.

If you would like more information on this topic or would like to set up a free consultation, please contact Kevin Kim, Esq. or call our main office at (949) 298-8050.