Two of three defendants have opted to settle in a securities fraud action that allegedly defrauded investors of approximately $2.7 million. In 2012, the Securities and Exchange Commission (SEC) charged a father, son and daughter team with the orchestration of a wide-reaching securities fraud scheme centered on a bogus $11 billion gold mine located in Ohio. Harry Dean Proudfoot III, Matthew Dale Proudfoot, Laurie Anne Vrvilo and their Oregon-based company, 3 Eagles Research & Development, were each charged with multiple violations of federal securities laws in connection with the scheme.
The Proudfoot family is charged with defrauding at least 140 investors, promising that 3 Eagles would extract over $11 billion of gold from its Ohio mine and provide a 35,000 percent return to each investor. As a result of the 2012 charges, Matthew Proudfoot and his sister, Laurie Ann Vrvilo, recently agreed to a settlement with the SEC. Along with permanent injunctions that prohibit future securities violations, the defendants will also be forced to return the $2.7 million fraudulently obtained from investors and pay prejudgment interest on that amount.
Allegations of Securities Fraud
Between September 2009 and October 2011, the Proudfoot family operated a fraudulent investment scheme that used an elaborate rouse to lure investors. Promising returns of up to 35,000 percent, 3 Eagles enticed potential investors to buy “royalty units” for its gold mine project. Each royalty unit required a $5,000 investment, promising investors a portion of the mine’s future profits.
In reality, the funds obtained from investors were not used to mine gold, but to buy expensive cars, valuable jewelry and elaborate vacations, according to the SEC. Due to the massive misappropriation of funds, 3 Eagles could not afford to start production within the gold mine. Further, the SEC alleged that 3 Eagles never owned the rights for most of the Ohio land it claimed to be mining for gold.
Details of the Gold Mine Scam
During 2008, Harry Proudfoot III formed the company known as 3 Eagles. He later appointed both of his children, Matthew and Laurie, to executive positions within the company. During 2009, the Proudfoot family allegedly developed a securities fraud scheme that, once in action, stole money from investors across 23 states.
Investors were shown elaborate sales presentations via email, UPS and face-to-face meetings. The promotional materials provided hundreds of potential investors with a broad outline of 3 Eagles’ gold mine project. Investors were allegedly told that 3 Eagles employed an “expert geologist team” to obtain samples from the mine, which supposedly showed large deposits of gold were present. They were also told 3 Eagles had recently obtained the license required to mine mineral deposits, namely gold, for 300 acres of land in the state of Ohio.
The Ohio gold mine, according to 3 Eagles, allegedly had a gross value of $11,250,000,000.00. Investors were assured that, once a “pilot plant” was built and production began, the gold mine would make them rich beyond their wildest dreams. In fact, 3 Eagles promised the operation would net a monthly revenue of approximately $1.6 million per investor. As a result, the Proudfoot family fraudulently obtained almost $3 million from investors.
According to the SEC, the promises made by the Proudfoot family were blatant lies. Unsuspecting investors’ funds were never used to purchase mining equipment, build a mining plant or operate a gold mine. 3 Eagles never hired a geology team or received a license to excavate minerals from the Ohio mine.
Instead, over $1 million was squandered by the Proudfoots to support a lifestyle of luxury. For example, $245,000 was spent on personal travel, clothing sprees and medical expenses. Another $100,000 was spent on automobiles, while an astounding $30,000 was used to buy vitamins and nutritional supplements. Perhaps most infuriating, Matthew Proudfoot fraudulently used investor funds to make his own personal bankruptcy payments each month.
In addition to charges of securities fraud, the SEC also accused 3 Eagles of failing to inform potential investors of the numerous fed flags associated with this investment. The red flags included prior regulatory actions taken against Harry Proudfoot in both Alaska and Oregon.
While the daughter and son chose to settle, the SEC’s action against the company, 3 Eagles, and their father, Harry Proudfoot, is still pending. The SEC is asking for injunctive relief, disgorgement of all fraudulently obtained investments and civil monetary penalties.