The Securities and Exchange Commission announced fraud charges and an emergency asset freeze against a Denver-based company and two Colorado residents for allegedly carrying out a $15.7 million Ponzi scheme that dragged in more than 120 investors nationwide.

The commisson alleges that Michael J. Turnock and William P. Sullivan II sold promissory notes to investors with the promise of annual returns of up to 12 percent, but actually paid the returns with funds from other investors.

The two sold the notes through Bridge Premium Finance LL, which purported to be an insurance premium financing company. They claimed the funds from the notes would be used to make short-term loans to small businesses to enable them to pay their up-front commercial insurance premiums, and assured investors that the business was doing well and that their funds were 100 percent protected through collateral.

According to the SEC, however, Bridge Premium has been unprofitable; its obligations to noteholders far exceed its assets; and it has been paying investors back with other investors' money since 2002.

A court granted the SEC's request for a temporary restraining order to freeze the assets derived from the alleged scheme.

According to the SEC's complaint, Turnock and Sullivan withheld from investors that Bridge Premium has not been profitable in any year since at least 1998, and has lost more than $3 million during the past five years. In May 2012, Bridge Premium owed investors more than $6.2 million, yet its insurance premium loan portfolio totaled less than $250,000 and its assets totaled less than $500,000, the commission said.

Daniel Hood writes for Accounting Today.