The SEC accuses Farahi, his wife, and another executive involved in his company, New Point Financial Services Inc., of committing fraud and participating in the unregistered sale of securities. The SEC claims the defendants persuaded more than 100 people to invest with them from 2003 to 2009.
According to the lawsuit, many were falsely told they were investing in low-risk government bonds and certificates of deposit backed by federal bailout money. Instead, the SEC contends some of the money was used to build a Beverly Hills mansion for the Farahis and that more than $18 million was lost through options futures trading. The SEC obtained an emergency court order freezing company assets, but authorities say most of the money was lost to risky investments.
The SEC claims most of the investors learned about New Point through Farahi's radio program, but KIRN General Manager John Paley says Farahi did not actively promote his company during the show.
"His name is up there. He's identified as a businessman, and it doesn't stop a listener from calling," Paley said. "He has been very circumspect about not airing anything he shouldn't air."
Farahi's lawyer declined to comment on the case.
Farahi's radio show has been canceled. Listeners were told the show would be off the air indefinitely.
AP contributed to this report.