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Charges: Fraud scheme netted $39M from unwitting investors

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The Securities and Exchange Commission (SEC) is accusing a former Florida man of operating a “long-running scheme designed to deceive investors,” a plan that netted tens of millions of dollars from unwitting victims.

According to the SEC’s allegations, the Sarasota man founded a hedge fund company in 2012, claiming its main sub-fund focused on U.S.-listed financial products, and that its portfolio was hedged with listed options. Over the years, he went on to raise $39 million from at least 30 investors in Florida and Puerto Rico.

The SEC claims this money was obtained fraudulently through unregistered securities. Investments for the sub-fund were frequently directed to the defendant’s own private financing company, the SEC alleges, not employed as described above. The agency also says he misappropriated $6.3 million of investor funds for his own “personal enjoyment.”

The SEC alleges the defendant:

  • Made material misrepresentations to investors
  • Omitted information
  • Made preferential payments based on false account values
  • Used his company to purchase luxury apartments and a historic bank building in Puerto Rico
  • Controlled the relevant bank accounts

The defendant’s lawyer has denied the accusations, arguing none of the loans identified by the SEC were a misappropriation of investors’ funds.

The prevalence of securities fraud

Securities fraud is, unfortunately, not an uncommon crime. According to the most recent statistics available, there were nearly 70,000 such cases reported to the U.S. Sentencing Commission in 2018.

For victims, the results can be devastating. The median loss for these offenses was over $2.5 million, with one in five resulting in a loss of more than $9.5 million. Those who have been defrauded do have legal options, and there are avenues through which you can seek compensation.