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.