Securities Fraud: CFP Board Suspends California Investment Adviser for Bilking Professional Athletes, SEC Orders Israeli-Based Firm to Pay $1.7M for Misleading Investors About Binary Options, and Ex-Movie Producer is Accused of Bilking Hedge Fund Investors

Investment Adviser Who Bilked Pro Athletes Gets CFP Board Suspension
The Certified Financial Planner Board of Standards has issued a temporary suspension against Ash Narayan. The California-based investment adviser is accused of bilking professional athletes of millions of dollars.

Narayan was recently named in a Securities and Exchange Commission complaint. In June, the regulator accused him of misrepresenting his professional qualifications and misappropriating client monies when he allegedly siphoned funds from investors’ accounts and invested the money in Ticket Reserve, a flailing online sports and entertainment ticket business.

Narayan is accused of moving  $33M of investor funds to the company and did not tell the athletes that he was a member of Ticket Reserve’s board, owned stock in the company, and was paid a $2M in finder’s fees for making the investments. The CFP Board called the investments “unsuitable” and not in line with clients’ objectives. The board also noted that some of the investments were made without client consent or knowledge.

The board accused Narayan of misrepresenting himself as a CPA, which he is not. His temporary suspension began on October 25.

 

Ex-Movie Producer Faces Charges of Bilking Investors of Millions of Dollars
The SEC is charging David R. Bergstein with defrauding hedge fund investors and spending their money to support his lavish lifestyle. Bergstein, an ex-movie producer and self-proclaimed private equity executive, is accused of bilking investors in ’11 and ’12. The alleged fraud involved transactions by then-registered Weston Asset Management and its unregistered Wimbledon Fund SPC Class TT Segregated Portfolio and Weston Capital Partners Master Fund II Ltd., which are both hedge funds.

The Commission contends that in one of the transactions, Bergstein allegedly misappropriated at least $2.3M of investors’ funds that were supposed to go into medical-billing businesses. In another transaction, Bergstein allegedly stole over $3.5M that also was supposedly meant for the same purpose.
Prosecutors in New York have brought criminal charges against Bergstein and ex-Weston Capital Asset Management COO and Chief Compliance Officer Keith D. Wellner.

 

EZTD Inc. Must Pay Over $1.7M for Misleading Investors Who Traded Binary Options Over the Internet
The SEC is ordering an Israeli-based firm to pay over $1.7M for allegedly misleading investors that ended up trading in binary options online. The regulator claims that not only did EZTD Inc. neglect to register the binary options or register as a brokerage firm allowed to sell investments to U.S. investors, but also the firm did not disclose to investors that the risk of financial loss was greater than the possibility of making money. Instead, contends the Commission, EZTD made statements about how trading binary options could be profitable.

The SEC found that of the about 4,000 US investors that set up accounts with the Israeli-based broker-dealer, less than 3% made any profit from their investments. Meantime, EZTD purportedly made most of its revenue from customer trading losses.

Binary Options typically employ an all-or-nothing payout structure. Investors bet on the fall or rise of a particular investment or benchmark. This can be a particular stock or market index, or other investments. Unlike with actually buying a stock or mutual fund based upon an index, however, the investor never actually owns anything. If an investor guesses right, they get back their investment plus some amount of profit. If the investor guesses wrong, then they lose their entire investment. Last week, the SEC put out an investor alert about certain red flags that may be indicate that binary options fraud is taking place. The Commission cautioned that should an investor decide to buy binary options from a firm that isn’t registered with the SEC, he/she may not be protected under US securities laws.

The SEC has received numerous investor complaints regarding binary options websites.

CFP Board Imposes Interim Suspension on Ash Narayan, Certified Financial Planner Board of Standards, Inc./PR Newswire, October 31, 2016

The SEC Action Against Narayan and The Ticket Reserve (PDF)

The SEC Complaint in the Bergstein Case (PDF)

The SEC Order in the EZTD Case (PDF)

The SEC’s Investor Alert About Binary Options (PDF)