Initial Decision Release No. 1374

Administrative Proceeding

File No. 3-17907

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

In the Matter of

Anthony C. Zufelt

Initial Decision

April 22, 2019

Appearance: John J. Bowers and Christian D.H. Schultz 

for the Division of Enforcement, 

Securities and Exchange Commission

Anthony C. Zufelt, pro se

Before: Brenda P. Murray, Chief Administrative Law Judge

Procedural Background

On August 22, 2018, the Securities and Exchange Commission ordered 

that Anthony C. Zufelt should be given the opportunity for a new hearing 

before an administrative law judge who had not previously participated in 

the matter and that no weight or presumption should be given to any prior 

opinions, orders, or rulings.1 Pending Admin. Proc., Securities Act of 1933 

Release No. 10536, 2018 SEC LEXIS 2058. The proceeding was assigned to 

me on September 12, 2018. Pending Admin. Proc., Admin. Proc. Rulings 

Release No. 5955, 2018 SEC LEXIS 2264 (ALJ).

On April 7, 2017, the Commission issued an order instituting 

proceedings (OIP), pursuant to Section 15(b) of the Securities Exchange Act 

 

1 The Commission issued a finality order on a prior initial decision on May 

17, 2018. Anthony C. Zufelt, notice of finality, Securities Exchange Act of 

1934 Release No. 83277, 2018 SEC LEXIS 1164.
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of 1934. The OIP alleges that Zufelt’s actions from June 2005 through 

December 2007, while he was acting as an unregistered broker-dealer, were 

the basis for a court to issue a final judgment enjoining Zufelt from future 

violations of Sections 10(b) and 15(a) of the Exchange Act, and Rule 10b-5; 

Sections 17(a), 5(a) and 5(c) of the Securities Act; and from participating in 

the issuance, offer, or sale of certain securities. OIP at 2; SEC v. Zufelt, 

No. 2:10-cv-00574 (D. Utah Oct. 7, 2016) (civil action).

2 I deemed what Zufelt 

submitted on May 22, 2017, to be an answer to the OIP. Anthony C. Zufelt, 

Admin. Proc. Ruling Release No. 6337, 2018 SEC LEXIS 3245, at *1 (ALJ 

Nov. 16, 2018).

Half an hour before the prehearing conference on November 15, 2018, 

Zufelt sent my office an email stating that he objected to this proceeding 

based on his interpretation of Supreme Court precedent and would not 

participate in the prehearing conference. I responded to his email, warning 

him that failure to participate in the prehearing conference could be grounds 

to find him in default. Zufelt did not participate. After the conference, I 

issued an order setting a procedural schedule under which either party could 

file a motion for summary disposition. Zufelt, Admin. Proc. Rulings Release 

No. 6337, 2018 SEC LEXIS 3245 (Nov. 16, 2018).

The Division filed a motion for summary disposition on February 7, 

2019.

3 Attached to the motion are: the complaint in the civil action (Ex. A); 

the court’s order granting partial summary judgment against Zufelt (Ex. B); 

the final judgment in the civil action (Ex. C); Zufelt’s answer (Ex. D); and an 

email string (Ex. E). On March 13, 2019, the Division submitted additional 

evidence in support of its motion, which consisted of the Division’s motions 

for summary judgment and final judgment in the district court and their 

 

2 The judgment was based on an earlier grant of partial summary 

judgment as to violations of Sections 5(a) and 5(c) of the Securities Act and 

Section 15(a) of the Exchange Act, and a default judgment on the remaining 

charges. OIP at 2.

3 The deadlines were extended due to the five-week furlough of 

Commission employees and subsequent stay of all administrative 

proceedings. See Pending Admin. Proc., Securities Act Release No. 10602, 

2019 SEC LEXIS 5 (Jan. 16, 2019); Pending Admin. Proc., Securities Act 

Release No. 10603, 2019 SEC LEXIS 37 (Jan. 30, 2019).
3

related exhibits.

4 ECF Nos. 199, 227. As of the date of this initial decision, 

Zufelt has not filed an opposition.

Zufelt could be considered in default because he failed to participate in a 

prehearing conference and respond to a dispositive motion. 17 C.F.R. 

§§ 201.155(a), .221(f). Because Zufelt participated to some degree, I allowed 

a motion for summary disposition, which allowed him an opportunity to 

respond to the allegations.

Findings of Fact

These findings are based on the record and on facts officially noticed 

under Rule 323, 17 C.F.R. § 201.323. The record includes those allegations in 

the OIP deemed admitted because they were not denied in the answer. 17 

C.F.R. § 201.220(c). I have applied preponderance of the evidence as the 

standard of proof. See Rita J. McConville, Exchange Act Release No. 51950, 

2005 WL 1560276, at *14 (June 30, 2005), pet. denied, 465 F.3d 780 (7th Cir. 

2006).

Between June 2005 and September 2007, Zufelt was the sole owner of 

Zufelt Business Services, Inc. (d/b/a Zufelt, Inc.), and Silver Leaf 

Investments, Inc. OIP at 1;

5 see Answer at 1; Ex. B at 2. Investments in 

Zufelt, Inc., were offered in the form of “purchase agreement[s].” See, e.g., 

ECF No. 199-11. Investors were told that their money would be used to 

purchase a credit card processing portfolio. See Answer at 1; see, e.g., ECF 

No. 199-17 at 7, 12. One investor’s investment of $200,000 “represent[ed] a 

purchase of an income stream in the amount of $4,800.00 a month,” which 

would be an annual return of 28.8%. Id. Investments in Silver Leaf were 

made in the form of promissory notes. See, e.g., ECF No. 199-13. The 

investor’s investment in Silver Leaf promised to pay “interest” at an annual 

rate of at least 28%. Id. The investor recalls Zufelt’s associates assuring her 

that her money “was never going to be lost.” ECF No. 199-17 at 31.

 

4 Citations to Exhibits A through C and the supplemental evidence refer to 

the ECF page number at the top right of each page. ECF refers to the 

electronic case filing system for most of the United States Federal Courts. 

5 The OIP calls the second company, Silver Leaf Investment, Inc., but the 

other evidence, including Zufelt’s answer and transactional documents, state 

that the company is Silver Leaf Investments, Inc. See, e.g., Answer at 1; ECF 

No. 199-13 at 1.
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No registration statements were filed with the Commission with respect 

to either company’s offerings or in Zufelt’s name individually. ECF Nos. 199-

2, 199-3, 199-5. Zufelt admitted that “the securities sold between 2005 and 

2007 were not properly registered.” Answer at 1. Zufelt and his two 

companies were not registered as broker-dealers. ECF Nos. 199-19–21. 

Zufelt, Inc., raised more than $2.8 million from 35 investors and Silver Leaf 

raised at least $720,000 from 11 investors. ECF No. 227-1 at 40 (conclusions 

of written report of forensic accountants retained by the Division); id. at 57 

(table listing investor deposits and payments). Investors in those two entities 

received less than $1.2 million in return. Id. at 40. At his deposition in the 

civil case, Zufelt testified that some of the returns to investors were paid by 

funds from new investors:

Q. So once you spend down whatever your working 

capital was, you were paying investors their 

monthly returns with investor funds that you’re 

bringing in.

A. Yes. That’s a possibility, yes.

Q. And that is, in fact, what happened, isn’t it?

A. Yeah. Yeah, that would have happened at some 

point. Yeah.

ECF No. 227-2 at 4.

The Commission filed a complaint against Zufelt, Zufelt, Inc., Silver 

Leaf, and other individuals and entities in the United States District Court in 

Utah on June 23, 2010. Ex. A. The complaint alleged that from 2005 to 2007 

Zufelt violated, or aided and abetted violations of, the registration and 

antifraud provisions of the Securities Act and the Exchange Act. See id.

On January 4, 2016, the district court granted partial summary 

judgment and found that Zufelt violated Sections 5(a) and 5(c) of the 

Securities Act by selling unregistered securities, and violated Section 15(a)(1) 

of the Exchange Act by acting as an unregistered broker-dealer in connection 

with the offer and sale of securities. Ex. B at 2. 

On February 22, 2016, “as a sanction for Zufelt’s repeated refusal to 

meaningfully participate in litigation,” the court entered a default on the 

Commission’s remaining claims, including securities fraud and aiding and 

abetting claims based on his solicitation of investors in Zufelt, Inc., and Silver 

Leaf. See Ex. C at 2 (referring to ECF No. 222).
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On October 6, 2016, the court entered a final judgment against Zufelt 

and enjoined him from violating Sections 10(b) and 15(a) of the Exchange Act 

and Rule 10b-5; Sections 5(a), 5(c) and 17(a) of the Securities Act; and from 

acting as an officer or director of an issuer and participating directly or 

indirectly in the issuance, offer, or sale of securities. In addition, the court 

ordered Zufelt to disgorge jointly and severally ill-gotten gains of more than 

$2.4 million, plus prejudgment interest, and ordered him to pay a penalty of 

$520,000. Ex. C at 3-7.

Motion for Summary Disposition

Rule of Practice 250(b) allows a motion for summary disposition in this 

type of proceeding where an answer has been filed, documents have been 

made available to the respondent, and there is no genuine issue with regard 

to any material fact. 17 C.F.R. § 201.250(b). Those requirements are met 

here. The Commission has approved the use of summary disposition in many 

follow-on proceedings such as this one. Gary M. Kornman, Exchange Act 

Release No. 59403, 2009 WL 367635, at *10 (Feb. 13, 2009), pet. denied, 592 

F.3d 173 (D.C. Cir. 2010); Jeffrey L. Gibson, Exchange Act Release No. 57266, 

2008 WL 294717, at *5 & n.21 (Feb. 4, 2008) (collecting cases), pet. denied, 

561 F.3d 548 (6th Cir. 2009).

Conclusions of Law

Exchange Act Section 15(b) authorizes the Commission to take certain 

actions, if it is in the public interest to do so, against a person who was 

associated with a broker or dealer where the person has been enjoined from 

actions in connection with the purchase or sale of any security. 15 U.S.C. 

§ 78o(b)(4)(C), (6)(A)(iii).6 Zufelt acted as an unregistered broker-dealer in 

connection with the offer and sale of securities during the period relevant to 

this proceeding.” Ex. B at 2; OIP at 1. It makes no difference under Section 

15(b) that Zufelt was not associated with a broker or dealer where, as here, 

he acted as one himself. Gary L. McDuff, Exchange Act Release No. 74803, 

2015 WL 1873119, at *1 n.2 (Apr. 23, 2015). Zufelt is subject to a 

Commission sanction because he has been enjoined from “participating 

 

6 Exchange Act Section 15(b)(6) specifies censure, placing limitations on 

the activities or functions, suspending for no longer than twelve months or 

bar from association with a broker, dealer, investment adviser, municipal 

securities dealer, municipal advisor, transfer agent, or nationally recognized 

statistical rating organization or from participating in an offering of penny 

stock.
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directly or indirectly in the issuance, offer, or sale of any securities.” Ex. C at 

5; see 15 U.S.C. § 78o(b)(4)(C).

Public Interest

In determining whether sanctions are in the public interest, the 

Commission considers the Steadman factors: the egregiousness of the 

respondent’s actions; the isolated or recurrent nature of the infraction; the 

degree of scienter involved; the sincerity of the respondent’s assurances 

against future violations; the respondent’s recognition of the wrongful nature 

of his conduct; and the likelihood that the respondent’s occupation will 

present opportunities for future violations. Steadman v. SEC, 603 F.2d 1126, 

1140 (5th Cir. 1979), aff’d on other grounds, 450 U.S. 91 (1981); see David R. 

Wulf, Exchange Act Release No. 77411, 2016 WL 1085661, at *4 (Mar. 21, 

2016). No single factor controls the outcome of the sanction determination, 

which is flexible. Kornman, 2009 WL 367635, at *6. In addition to the 

factors above, the Commission considers the age of the violation, the degree 

of harm to investors and the marketplace resulting from the violation, and 

deterrence. See Schield Mgmt. Co., Exchange Act Release No. 53201, 2006 

WL 231642, at *8 & n.46 (Jan. 31, 2006); Marshall E. Melton, Advisers Act of 

1940 Release No. 2151, 2003 WL 21729839, at *2 (July 25, 2003).

Egregious and Recurrent Nature of Zufelt’s Actions

Zufelt’s conduct was egregious, that is, conspicuously bad, for the 

following reasons. Zufelt told investors they would receive monthly payments 

representing annual returns of greater than 20 percent. But the evidence 

shows that investors lost more than $2 million. Although Zufelt claims that 

he was running a legitimate business, Answer at 1, Zufelt’s testimony and an 

analysis of bank records shows that Zufelt used new investor money to pay 

existing investors, ECF Nos. 227-2 at 4, 227-1 at 14, a classic description of a 

Ponzi scheme. See Bernerd E. Young, Securities Act Release No. 10060, 2016 

WL 1168564, at *1 n.2 (Mar. 24, 2016) (“A Ponzi scheme, named for the 

perpetrator of such a scheme in the 1920s, is an investment fraud that 

involves the payment of purported returns to existing investors from funds 

contributed by new investors.”), pet. filed, No. 16-1149 (D.C. Cir. May 24, 

2016). His conduct was also recurrent, as it lasted more than two years and 

involved 46 investors. ECF No. 227-1 at 57.

In addition, the registration requirements of Securities Act Section 5 are 

“a keystone of the entire system of securities regulation.” Allen M. Perres, 

Securities Act Release No. 10287, 2017 WL 280080, at *3 (Jan. 23, 2017)

(quoting Sirianni v. SEC, 677 F.2d 1284, 1289 (9th Cir. 1982)), pet. denied, 

695 F. App’x 980 (7th Cir. 2017). In Perres, the Commission said that the 
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registration requirement of Exchange Act Section 15(a) is also “of the utmost 

importance . . . because it enables the SEC to exercise discipline over those 

who may engage in the securities business and it establishes necessary 

standards with respect to training, experience, and records.” Id. (quoting 

SEC v. Benger, 697 F. Supp. 2d 932, 944 (N.D. Ill. 2010)). Participating in 

the securities marketplace without complying with the registration 

requirements in the Securities Act and Exchange Act harms the marketplace. 

See Gordon Brent Pierce, Securities Act Release No. 9555, 2014 WL 896757, 

at *23 (Mar. 7, 2014) (sale of unregistered shares “caus[ed] harm to investors 

and the marketplace by depriving investors of the full disclosure that would 

have allowed them to make informed investment decisions”), pet. denied, 786 

F.3d 1027 (D.C. Cir. 2015). 

Zufelt’s conduct was both egregious and recurrent.

Zufelt’s Degree of Scienter

Scienter is “a mental state embracing intent to deceive, manipulate, or 

defraud.” Aaron v. SEC, 446 U.S. 680, 686 n.5 (1980) (quoting Ernst & Ernst 

v. Hochfelder, 425 U.S. 185, 194 n.12 (1976)). The registration provisions 

from which he has been enjoined from violating do not have a scienter 

element. The antifraud statutes do require proof of scienter, but due to 

Zufelt’s default, the district court made no findings in that regard. In his 

answer, he denies he had any intent to defraud or mislead investors. Answer 

at 1-2. But, as mentioned above, he admitted that new investor funds were 

used to pay returns to other investors. Further, an analysis of the bank 

records of Zufelt and his various businesses indicates that much of the money 

invested in Zufelt, Inc., and Silver Leaf was rerouted for Zufelt’s personal 

use. ECF No. 227-1 at 21. Yet Zufelt told potential investors that their 

money would be used to invest in credit card processing. See, e.g., ECF 

No. 199-7 at 12. Zufelt’s use of investor funds for purposes other than those 

advertised to investors shows an intent to defraud investors. Cf. SEC v. 

Scoville, 913 F.3d 1204, 1224 (10th Cir. 2019) (“a Ponzi scheme . . . is 

inherently deceptive because it generates a false appearance of profitability 

by using money from new investors to generate returns for earlier investors” 

(internal quotation marks omitted)); SEC v. Smart, 678 F.3d 850, 857 (10th 

Cir. 2012) (finding intent to defraud where investor funds were used, 

contrary to the stated purposes, to make partial payments to other investors 

and to cover personal expenses).
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Lack of Assurances Against Future Violations and Recognition of the 

Wrongful Nature of Conduct

Zufelt concedes in his answer that “mistakes were made,” but he does 

not admit that he personally committed misconduct. Answer at 1. Rather he 

disclaims responsibility for running a Ponzi scheme and blames others for 

investor losses even though he directed investor money to himself and his 

personal businesses. Id. at 1-2; see ECF No. 227-1 at 21. Zufelt has not 

recognized that his conduct was wrong and, by choosing to not meaningfully 

participate in this proceeding, he has forfeited an opportunity to provide any 

assurances against future violations.

Opportunities for Future Violations

Given his apparent persuasive gifts with investors and his refusal to 

participate in civil and administrative proceedings where his conduct was at 

issue, there is a very high possibility Zufelt will violate the securities statutes 

and regulations in the future. See Tzemach David Netzer Korem, Exchange 

Act Release No. 70044, 2013 WL 3864511, at *6 n.50 (July 26, 2013).

I take official notice, pursuant to 17 C.F.R. § 201.323, of United States v. 

Zufelt, No. 2:14-cr-00235 (D. Utah), in which Zufelt pled guilty on May 3, 

2016, to a violation of 18 U.S.C. § 152(1), which makes it a crime in a 

bankruptcy proceeding to “knowingly and fraudulently conceal[] . . . any 

property belonging to the estate of a debtor.” Zufelt was sentenced to twelve 

months and one day in prison, thirty-six months of supervised release, and 

ordered to make restitution of $80,755. ECF No. 125. This conviction further 

bolsters the need to bar Zufelt, as the Commission has stressed that “the 

importance of honesty for a securities professional is so paramount” that it 

has barred individuals for convictions “based on dishonest conduct unrelated 

to securities transactions or securities business.” Kornman, 2009 WL 

367635, at *7 & n.28.

The facts are persuasive that it is necessary and appropriate for the 

protection of investors to bar Zufelt from participating in the securities 

industry. 

Order

I GRANT the Division of Enforcement’s motion for summary disposition. 
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And, pursuant to Section 15(b) of the Securities Exchange Act of 1934, I 

ORDER Anthony C. Zufelt barred from association with a broker or dealer, 

and from participating in an offering of penny stock.7 

This initial decision shall become effective in accordance with and 

subject to the provisions of Rule 360 of the Commission’s Rules of Practice, 17 

C.F.R. § 201.360. Pursuant to that Rule, a party may file a petition for 

review of this initial decision within twenty-one days after service of the 

initial decision. A party may also file a motion to correct a manifest error of 

fact within ten days of the initial decision, pursuant to Rule 111 of the 

Commission’s Rules of Practice, 17 C.F.R. § 201.111. If a motion to correct a 

manifest error of fact is filed by a party, then a party shall have twenty-one 

days to file a petition for review from the date of the undersigned’s order 

resolving such motion to correct a manifest error of fact. The initial decision 

will not become final until the Commission enters an order of finality. The 

Commission will enter an order of finality unless a party files a petition for 

review or a motion to correct a manifest error of fact or the Commission 

determines on its own initiative to review the initial decision as to a party. If 

any of these events occur, the initial decision shall not become final as to that 

party.

_______________________________

Brenda P. Murray

Chief Administrative Law Judge

 

7 A respondent subject to a penny stock bar is barred from acting as a 

promoter, finder, consultant, or agent; or otherwise engaging in activities 

with a broker, dealer, or issuer for purposes of the issuance or trading in any 

penny stock; or inducing or attempting to induce the purchase or sale of any

penny stock, pursuant to Exchange Act Section 15(b)(6)(A), (C).