NEW YORK (Bloomberg) - US regulators said they halted a $68 million Ponzi scheme at Caribbean-based Millennium Bank, the second case this year accusing a bank in the islands of fraudulently selling certificates of deposit.

Millennium, describing itself as the subsidiary of a Swiss bank, made "blatant misrepresentations and glaring omissions" while marketing the instruments to wealthy US clients since 2004, the Securities and Exchange Commission (SEC) said in a statement yesterday. A federal judge in Texas agreed to freeze assets after the SEC sued both companies and five people, including residents of North Carolina and California.

"The defendants disguised their Ponzi scheme as a legitimate offshore investment and made promises about exuberant returns that were just too good to be true," said Rose Romero, director of the SEC's office in Fort Worth, Texas, in a statement. Attorneys for the defendants could not be located.

The lawsuit against Millennium is similar to a February SEC case against Texas billionaire R Allen Stanford, whom the agency accused of defrauding investors out of as much as $8 billion. In both cases, operators told investors their money was being managed by a team of professionals under the watch of Caribbean regulators, according to the SEC.

"Investors need to be especially cautious when placing money with entities that may be outside the reach of US regulators," Ms Romero said.

The SEC has disclosed more than a dozen lawsuits this year to freeze money raised in alleged Ponzi schemes, in which early investors are typically paid using money raised from later participants. "You will not see a week go by where we are not bringing federal court cases against Ponzi scheme operators," SEC Chairman Mary Schapiro told Congress yesterday.

At Millennium, based in St. Vincent and the Grenadines, "none of the investor funds were used for any investment purpose," the agency said in its complaint at federal court in Wichita Falls, Texas. Instead, defendants took a "vast majority" of the money, while using a portion to pay purported returns, it said.

The scheme was orchestrated by William Wise, 58, who has residences in Raleigh, North Carolina, and the Caribbean, and by Kristi Hoegel, 34, who lives in Napa, California, according to the complaint. The lawsuit names Ms Hoegel's mother, Jacqueline Hoegel, of American Canyon, California, and two other people. The SEC wants them to forfeit profits and pay unspecified fines.

Mr. Wise did not respond to a message left at the bank, and a Raleigh telephone number in his name is disconnected. Kristi Hoegel also is known as Kristi Christopher, the SEC said. Nobody answered a phone listed in that name. Jacqueline Hoegel, 52, didn't respond to a message at a number listed in her name.

Millennium marketed the certificates in Internet banner advertisements and in magazines catering to wealthy investors, the SEC wrote in its complaint. The ads, with slogans like "Invest in Peace", boast that offshore banks can offer higher interest rates compared with larger domestic rivals.

Customers were told to send checks to the Caribbean, where they were collected and mailed to Napa, the SEC said. The money was then deposited into a single Washington Mutual Inc. bank account opened in Las Vegas by the Hoegels, it said.

Money from the account was shared among at least nine people and seven businesses, including the bank and a company listed as its parent, United Trust of Switzerland SA, the SEC said. From October 2008 to February, about $3 million was returned to investors.

Mr. Stanford, who has not been criminally charged, filed papers last month refusing to testify in the SEC case and asserting his right against self-incrimination under the Constitution. His lawyer, Dick DeGuerin, in a telephone interview yesterday denied Mr. Stanford's business was a Ponzi scheme and said regulators caused investors to panic, creating a fatal run on his financial empire.