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Portfolio > Alternative Investments > Hedge Funds

Rogue advisors on parade: Family business

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Two brothers and a business associate were sentenced for masterminding a multi-million dollar viatical fraud. One brother was sentenced to 240 months in prison; the other to 160 months; and the associate to 120 months. The brothers were also ordered to pay approximately $88 million and the associate approximately $52 million in victim restitution. According to court documents, the defendants fraudulently induced investors to purchase interests in viatical/life settlements by misrepresenting their safety. They then diverted client funds to a failed oil and gas venture.

A Massachusetts man, arraigned for kidnapping and rape, is now charged with defrauding investors. As the man’s rape case got media exposure, Massachusetts investors complained to the Massachusetts Securities Division that they couldn’t access their funds. According to officials, the advisor convinced clients to transfer funds from legitimate investments to his firm. Promising to pay a 7 percent rate of return, he instead deposited the funds into his own bank accounts. The SEC is also taking action against the advisor.

A District of Columbia tax preparer was sentenced to six months in prison followed by six months home detention, a $5,000 fine and supervised release. The U.S. District Court also ordered the 70-year-old man to perform 200 hours of community service. The tax preparer pleaded guilty to conspiracy to defraud the Internal Revenue Service by preparing false tax returns for clients, including overstated Schedule A deductions, incorrect filing status and false Hope Education credits.

Harry Lew is the communications and content director for the National Ethics Bureau. He can be reached at [email protected].


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