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updated 6/25/2010 3:13:20 PM ET 2010-06-25T19:13:20

The government said Friday it obtained a court order to halt an alleged $34 million pyramid scheme targeting federal employees and law enforcement agents with promises of safe investments in a nonexistent bond fund.

The Securities and Exchange Commission said the order issued Thursday by a federal judge in Miami also froze the assets of the estate of the late Kenneth Wayne McLeod, his consulting firm Federal Employee Benefits Group of Jacksonville, Florida, and an affiliated investment firm. The SEC alleged that McLeod and the firms defrauded an estimated 260 investors starting in 1988.

McLeod used their retirement savings to enrich himself and pay for lavish entertainment, the SEC said in a civil complaint filed Thursday in federal court in Miami.

McLeod's estate, the retirement benefits consulting firm and the investment firm, F&S Asset Management Group, don't appear to be represented by an attorney, the SEC said. Representatives of the firms couldn't immediately be located for comment Friday.

The SEC alleged that McLeod lured many of the active and retired federal employees through retirement benefits seminars he put on at government agencies around the U.S. He promoted the security of the government bond fund but in fact never bought any bonds and used the money to run a Ponzi, or pyramid, scheme, using new investors' money to pay earlier investors, according to the SEC.

Federal Employee Benefits Group provided investors with personalized retirement benefit analyses and offered the option of having F&S Asset Management manage their money, the SEC said. In addition to conventional investments offered through that firm, McLeod offered many investors guaranteed annual returns of 8 percent to 10 percent in a tax-free fund backed by government bonds, the agency said.

"McLeod victimized law enforcement agents and other government employees who dedicated their lives to the service of this country," Eric Bustillo, director of the SEC's Miami regional office, said in a statement. "The victims gave years of public service and McLeod stole their futures."

The SEC is seeking unspecified restitution and civil fines against McLeod's estate and the two firms.

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