SEC Charges Financial Advisor with Stealing $20 Million from Clients

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SEC Charges Financial Advisor with Stealing $20 Million from Clients

Financial advisor was accused of stealing at least $20 million from clients to fund his own private accounts.  He then misused the majority of the money in extremely unsuccessful options trading.

The SEC alleges that a private client advisor misused his position by convincing bank customers to withdraw large amounts of money from their accounts for him to purchase safe, low-risk municipal bonds in new accounts.  However, instead of purchasing the appropriate bonds, the advisor bought himself cashier’s checks and deposited all the funds into both his own private account and his wife’s account, which he controlled.

Shortly after stealing and depositing each customer’s funds, the advisor traded stock options of high-profile companies such as Tesla, Apple, Google, Netflix, and others.  In most cases, the advisor lost the whole investment.  On the rare occasions that his personal brokerage accounts made a profit, he wired money to separate bank accounts either in his or his wife’s name.  The SEC found at least one instance where an outgoing wire was used as a payment on his mortgage.

According to the complaint filed by the SEC, the financial advisor made many attempts to disguise his fraudulent theft and trading.  On one occasion, the advisor created a fabricated account statement in response to a customer’s request to see a statement of his municipal bond holdings.  The advisor merely replaced a true bond holder’s name on a statement with the name of the customer he stole from.  The advisor then passed off the fake statement as true to persuade the customer he had purchased the municipal bonds as promised.  On another occasion, the advisor relocated funds from one customer to a different customer to recover previously stolen money.

In addition to the civil charges pressed by the SEC, the advisor also faces criminal charges by the U.S. Attorney’s Office for the Southern District of New York.  In the SEC’s case, the advisor is charged with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Section 206(1) and 206(2) of the Investment Advisers Act of 1940.  The SEC also seeks disgorgement plus prejudgment interest, financial penalties, and permanent injunctions prohibiting future violations.  The SEC also names the advisor’s wife as a relief defendant for purposes of recovering any customer funds that may have been transferred to her account.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.

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