Kristofor R. Behn and his Fieldstone Financial Management are now facing US Securities and Exchange Commission (SEC) charges accusing them of defrauding retail investors. Behn and the firm, which was a registered investment adviser until March, recommended that their clients invest in Aequitas Management LLC-issued securities. In 2016, Aequitas and four of its affiliates were accused of defrauding over 1500 investors of around $350M–although that figure could be as high as around $600M.
The Commission contends that between 2014 and early 2016, Behn and Fieldstone advised about 40 individuals to invest over $7M in Aequitas securities, while failing to disclose that the company had given Fieldstone a $2M credit line and a $1.5M loan. Both were reasons for him and his firm to recommend the investments to clients seeing as, per the terms:
- If $25M of the assets of Fieldstone’s clients went into Aequitas securities, then Behn could pay back the loan by “converting the debt into an equity interest” in Fieldstone, with the interest belonging to Aequitas.
- The more of Fieldstone clients’ assets that were invested in Aequitas securities, the more that Behn could take out money from the credit line. A decrease in how much of these assets were invested in Aequitas securities could lead to Fieldstone becoming obligated to pay part or all of the outstanding balance left on the credit line.
According to the SEC’s order, Behn misused $500K from one investor to cover his own expenses and taxes after persuading that client to invest $1M in Fieldstone. The. Commission also found that in filings made to the regulator, Behn and the firm made material misstatements and omissions, including falsely representing that repaying the loan granted by Aequitas had no connection to whether their clients invested in the company.
Behn and Fieldstone have consented to the SEC order but without denying or to admitting to the regulator’s findings that both of them violated securities laws. Fieldstone also must pay over $1M in disgorgement plus prejudgment interest and a $275K penalty. Behn has been permanently barred by the regulator.
Aequitas Investor Fraud
Investors who backed Aequitas thought they were getting involved in trade receivables involving education, healthcare, transportation, and consumer credit areas. Instead, the funds were misappropriated in an attempted to save Aequitas, with some investors’ money used to pay earlier investors in Ponzi-like fashion, and to continue supporting executives’ salaries.
Last month, ex-Aequitas CFO Olaf Janke pleaded guilty to conspiracy to commit wire or mail fraud and conspiracy to commit money laundering. When he left the company in 2015, he had cashed out his equity–around $1.5M–that he purportedly knew came from investors’ money, which had been fraudulently obtained. In April, Aequitas co-founder Brian Oliver pleaded guilty to money laundering and fraud.
Investor Fraud Claims
Our investor lawyers are working with clients who were sold Aequitas securities by an investment advisor or broker and/or their firms. Please contact Shepherd Smith Edwards and Kantas, LLP today (SSEK Law Firm) so that we can offer you a free, no obligation case consultation.
If we agree to work together, you won’t pay anything out of your own pocket. You would only pay legal fees upon financial recovery, which is where the funds would come from. Over the years, we have helped thousands of investors to recoup their investment fraud losses.