SEC Accused Investment Adviser of Profiting from Cherry Picking
The US Securities and Exchange Commission has filed a civil fraud case against Strong Investment Management, which is a California-based investment adviser, and its president/owner Joseph B. Bronson. The regulator is accusing them of running a cherry picking scam that defrauded the firm’s clients.
The Commission contends that Bronson used Strong’s omnibus account to trade securities but would wait to see how they performed during the day before distributing them to certain client accounts. Meantime, Bronson purportedly made healthy profits at cost to clients by cherry picking the trades. He is accused of giving himself trades that were profitable while sending unprofitable ones to firm clients.
The SEC’s complaint contends that in Forms ADV, Bronson and Strong misrepresented trading and allocation practices by falsely stating that every trade would be allocated according to the terms of pre-trade allocation statements with no preference granted to any account. Bronson’s brother, ex-Strong chief compliance officer John B. Engebreston, is accused of not fulfilling his job by failing to make sure that Strong’s policies and procedures for trade allocation were followed. He also is accused of “repeatedly” ignoring “red flags” when it came to Strong’s allocation practices.
Investment Fraud Allegations lead to Criminal Convictions
A federal jury has convicted William A. Goldstein and Marc E. Bercoon of Georgia of multiple counts of mail fraud, conspiracy, securities fraud, and wire fraud for defrauding investors of more than $2.5M. Federal prosecutors say that the two men rigged the market for the stock of MedCareers Group, Inc., a publicly traded company, by inflating its share price to compel investors to buy. Then, In May 2010, in “pump-and-dump” fashion, Goldstein and Bercoon sold their stocks in MedCareers Group, Inc. by using the names of other people and entities so they’re involvement would remain hidden.
Goldstein and Bercoon also allegedly bilked investors in a private company called Find.com Acquisition, Inc.by lying to them when selling them the shares. $1.5M of investors’ money, which was supposed to go toward the development of a new internet search engine, went to unrelated purposes, including to the two men and their relatives.
Ex-Investment Adviser Must Pay $3.1M in Restitution and Go to Prison
Richard Mark Schmerman, an ex-investment adviser, is sentenced to five years in prison after he plead guilty to theft and fraud. Prosecutors say that Schmerman pretended to be was certain clients so he could access their investment accounts. He then used their funds to pay for his own expenses, including a 400K civil judgment in a case against him.
Aside from serving time in prison, Schmerman now must pay $3.1M in restitution.
Investment Adviser Fraud Lawyers
At Shepherd Smith Edwards and Kantas, LTD LLP, our investor fraud lawyers work with investors that have sustained losses because of an investment adviser’s wrongful, careless, or negligent actions. Over the years, our securities law firm has helped thousands of investors. Contact us today to schedule your free case evaluation.
North Fulton Man Convicted In Investment Fraud Scheme, Patch.com, February 22, 2018
Atlanta Businessmen Arrested On Market Manipulation Charges, Justice.gov, January 28, 2015
Ex-investment adviser gets 5 years for stealing from clients, The Seattle Times, February 14, 2018
More Blog Posts from SSEK Law Firm:
BitFunder and Its Founder Face Fraud Allegations, Stockbroker Fraud Blog, February 19, 2018
BitConnect Shutters Its Lending and Exchange Operation, Leaving Texas Investors With No Place to Trade Their BCC Currency, Stockbroker Fraud Blog, January 17, 2018
Royal Bank of Scotland Settles Mortgage-Backed Securities Fraud Case Brought by Pension Funds for $125M, Institutional Investor Securities Blog, December 29, 2017