Investment Adviser Fraud Cases Lead to Civil Charges, Criminal Convictions, and Investor Losses

SEC Accuses Elm Tree Investment Advisors, its Founder, of $17M Securities Fraud
The Securities and Exchange Commission has filed fraud charges against Elm Tree Investment Advisors LLC and its founder Frederic Elm for running a Florida-based securities scam that raised over $17 million in a little over a year. The regulator contends that Elm, his firm, and the funds Elm Tree Motion Opportunity LP, Elm Tree “e”Conomy Fund LP, and Elm Tree Investment Fund LP misled investors and used the bulk of the funds to issue Ponzi-like payments. Elm also is accused of using the money to purchase expensive homes, jewelry, and autos, as well as cover his daily living expenses.

According to the SEC, Elm, his unregistered advisory firm, and the three funds violated the regulator’s anti-fraud rules as well as federal securities laws. The Commission wants relief for investors as well as the restoration of the purportedly ill-gotten gains and financial penalties.

A judge granted the regulator’s request for a temporary asset freeze and issued restraining orders against all those named. Elm’s wife, Amanda Elm, is a relief defendant.

District Court Issues 40 Month Sentence for Cherry Picking Scam
In other investment adviser fraud news, a district court has sentenced Noah Myers to 40 months behind bars for running a cherry picking securities scheme. Myers pleaded guilty last year to one count of securities fraud, which the government says cost investors around $470,000. Myers owns MiddleCove Capital LLC.

Between 4/09 and 11/10, Myers bought a number of securities, including the leveraged exchange-traded fund (ETF) ProShares UltraShort Financials. He then disproportionately allocated the trades that went up in value to his own accounts. In 2013, the SEC took back MiddleCove’s investment adviser license. Myers is now barred from the securities industry.

Ohio Man Accused of $5.5M Ponzi Scam
In an unrelated Ponzi scam, an Ohio man has been charged with running a $5.5 million scheme that bilked at least 19 investors. Geoffrey Nehrenz is accused of promoting and selling investments contracts to clients via Keystone Capital Management. The investment adviser firm is not registered with the SEC.

Nehrenz allegedly falsely represented to prospective clients that their money would be pooled, invested in mid- and large-capitalization, publicly traded U.S. securities by day, and changed into cash at night. He is accused of instead using the funds to cover his personal and business spending and, without client permission, make side pocket investments involving speculative, high-risk trades in overseas and domestic private placement vehicles.

SEC ALJ Finds Harding Advisory Firm Liable for CDO Fraud
An SEC Administrative Law Judge has found Wing Chau and his Harding Advisory LLC liable for fraud. The regulator accused Chau of letting a hedge fund control which assets would back a collateralized debt obligation, the Octans I CDO Ltd., without notifying investors.

The firm must pay $1.7 million as a penalty. Chau has to pay $340,000. They also must disgorge $1 million in profits plus interest.

Uniontown man accused of defrauding investors $5.5M, WKYC, January 16, 2015
Connecticut investment adviser sentenced to 40 months in prison for fraud, Reuters, January 12, 2015

An Investment Adviser Who Sued Michael Lewis For Defamation Has Been Found Liable For Fraud, Business Insider, January 13, 2015

SEC Charges Investment Adviser and Manager in South Florida-Based Fraud, SEC, January 21, 2015

More Blog Posts:
Investment Adviser News: Barred Representative is Now a Finance Coach, Bellingham Man Gets Prison Term for Bilking Seniors, Stockbroker Fraud Blog, January 13, 2015
Standard & Poor’s to Pay Almost $80 Million to Resolve SEC Charges Over Ratings Fraud Involving CMBSs, Institutional Investor Securities Blog, January 21, 2015

UBS Settles SEC Dark Pool Case for $14M, Stockbroker Fraud Blog, January 16, 2015