Exceptional and accessible legal representation across Kentucky and Nationwide

Exceptional and accessible legal representation across Kentucky and Nationwide

EXCEPTIONAL AND ACCESSIBLE LEGAL REPRESENTATION ACROSS KENTUCKY AND NATIONWIDE

Experienced hedge fund manager? Try experienced con artist, says SEC

On Behalf of | Oct 20, 2022 | Securities Fraud |

It’s hard to know who to trust these days. A Harvard MBA and military vet with experience managing a $1.15-billion hedge fund sounds like a good bet, right?

Except that, according to the Securities and Exchange Commission, he just made up those credentials to gain people’s trust so he and his partner could run a number of schemes and scams.

According to the SEC’s criminal complaint, the man, who we’ll call J.C., falsely represented himself to more than 30 investors as Harvard-educated and a seasoned Wall Street investor with a stake in the cannabis industry. In fact, he claimed to be a licensed investment professional.

One couple trusted J.C. to be their investment adviser. The SEC says he sold them $1.8 million shares of penny stocks – at a 9,000% markup. Then, he used their brokerage account to trade microcap companies in which he had a secret financial interest. These trades were made at a significant loss to the couple.

The SEC also says that J.C. and a partner we’ll call D.F. engaged in pump-and-dump stock promotion scams. J.C. would acquire penny stocks and then D.F. would hype those stocks on Twitter without disclosing that he would benefit financially from the rising stock price. Together, the pair allegedly made off with $792,000 in illicit profits.

How do you protect yourself against con artists?

On its web page investor.gov, the SEC lists six common red flags of fraud:

  • Sounds too good to be true
  • Offers guaranteed returns
  • The recommendation comes with a small favor, such as a free lunch or workshop
  • A con artist’s “halo effect,” which makes their recommendations seem trustworthy
  • The argument that everyone is buying in
  • Pressure to send money now

Before you invest a significant amount of money, take a day to think on it. If it bothers to you have to take a day, you may be under pressure.

In the case discussed above, J.C. claimed to be a licensed investment professional. Also on the home page of investor.gov, you can look up whether an investment professional, such as a broker or investment adviser, is registered with the SEC.

A free full report tells you about the professional’s employment, license and registration history. Always run this check on anyone who proposes to take your money in exchange for investment advice.