Unregistered investment advisers (IAs) David Wagner and Mark Lawrence, Downing Investment Partners, Downing Partners, and Downing Digital Healthcare Group are now facing US Securities and Exchange Commission (SEC) charges accusing them of involvement in an $8M scam that allegedly defrauded dozens of healthcare fund investors. Wagner and Downing are also facing parallel criminal charges.
The regulator contends that between 5/2014 and 1/2017, Wagner, Lawrence, and the companies they headed sold healthcare services and technology-related investment opportunities while defrauding 30 investors, many of them “purported” employees at two of the defendant companies, as well as at Downing Health Technologies, Inc., and Cliniflow Technologies. According to the SEC’s complaint, the two unregistered investment advisers and their companies claimed to acquire, oversee, and resell companies that offered technologies and services for the investment portfolios of the healthcare funds at issue.
To bring in new investors, the two unregistered IA’s allegedly would inflate how much was available in cash reserves at the funds, including at Downing Digital Healthcare Group and Downing Investment Partners, as well as the revenue from the portfolio companies of the funds. Wagner is also accused of secretly negotiating a deal that obligated Downing Digital Healthcare Group to pay him and an entity that he operated certain management fees. This allegedly resulted in the defendants misusing at least $540K of the $1.5M that was invested in Downing Digital Healthcare Group to go toward these fees.
Criminal Case Alleges Ponzi Scam
In the parallel criminal investment fraud case, Wagner and Lawrence are charged with multiple criminal counts, including wire fraud and securities fraud. They are accused of running a Ponzi-like scam.
Employee-investors were invited to participate in a supposed “multi-million dollar venture capital business” business that would also employ them. They each invested between $150K to $250K.
Prosecutors from the US Attorney’s Office for the Southern District of New York said that Wagner and Lawrence had made false and misleading statements about the Downing entities’ financial health, how investors’ money would be used, their ability to pay “employee-investors” their salaries, and other matters. Investor-employees would eventually find out that, contrary to what had been represented to them, they were the primary source of funding, Downing lacked millions of dollars in funding, frequently was not able to fulfill payroll, and had “virtually no products” for sale. Investors’ money was allegedly used to repay earlier investors, cover hidden management fees, and pay for Wagner and Lawrence’s personal expenses.
The two unregistered investment advisers allegedly continued to perpetuate the fraud by hiring employee-investors into Cliniflow, again by issuing false and misleading statements.
Investor Fraud Cases
A number of employee investors have already filed investor fraud cases against Lawrence, Wagner, and the Downing entities. At Shepherd Smith Edwards and Kantas, LLP, (SSEK Law Firm), we work with investors throughout the US. We have helped thousands of investors in fighting to recover losses they’ve suffered due to negligence, fraud, or other misconduct. Contact our investor lawyers today and we’ll be happy to offer you a free, no obligation case consultation.
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