SEC Bars Former Wells Fargo Broker Over Alleged $1.3M Senior Investor Fraud

Just a few weeks after former Wells Fargo (WFC) broker John Gregory Schmidt consented to a final judgment in the US Securities and Exchange Commission’s (SEC) investor fraud case against him, the regulator announced that it has barred Schmidt for misappropriating more than $1.3M from clients, most of them elderly retired investors. Schmidt, who also ran Schmitt Investment Strategies Group in Ohio and was already barred by the Financial Industry Regulatory Authority (Finra), was fired by Wells Fargo in 2017. In a parallel criminal case, he is also charged with 128 felony counts over the same fraud allegations.

The SEC’s complaint notes that at the time that Wells Fargo fired Schmidt, he had about 325 retail brokerage customers. At least half of them had worked with him for over a decade, and a “significant percentage” were retirees who depended on regular withdrawals from their brokerage accounts to cover their living expenses. Many of them were unsophisticated, inexperienced investors, some of whom were suffering from dementia, including Alzheimer’s disease.

Schmidt’s scam purportedly involved making unauthorized sales and withdrawals involving variable annuities from certain customers’ accounts and then using fraudulent authorization letters to move the money to the other clients’ accounts. According to the Commission’s complaint, between ’03 and ’17, Schmidt took money out of seven clients’ accounts and moved the funds to the accounts of other clients to conceal shortfalls there.

He allegedly hid these shortfalls by sending out bogus account statements that exaggerated account balances while making it seem as if there were enough returns on clients’ investments that they could continue to take money out without harming their principal. Meantime, Schmidt earned more than $230K in commissions from both the customers who received the misappropriated monies and those whose funds he stole.

Investor Fraud Leads to Criminal Charges
In December, a grand jury indicted Schmidt on 128 felony counts, including 124 forgery counts, two counts of theft in an amount larger than $150K involving an older or disabled adult, one count of deceit or fraud by an investment adviser involving more than $150K, and one count of telecommunications fraud involving more than $150K.

Schmidt was an experienced broker with more than 35 years in the securities industry. According to his BrokerCheck record, previous to working with Wells Fargo, from 2006 to 2017, he was a registered broker with Stifel, Nicolaus, & Co., First Union, Painewebber, Prudential-Back Securities, and three IDS firms. Based on his broker history, he would have been registered with Wells Fargo and Stifel, Nicolaus during the alleged investor fraud.

Broker Fraud Lawyers
Our broker fraud law firm is dedicated to helping older investors and other investors in recouping losses caused by fraud, negligence, or other wrongdoing. If John Gregory Schmidt was your broker and you suspect your investment losses may have been a result of fraud, contact Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) today. Our senior investor fraud lawyers have helped countless investors in recovering their fraud losses from both negligent brokers and their brokerage firms that failed to properly supervise them and/or detect the fraud.