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The SEC Brings the Hammer to Rogue Advisors

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The SEC has charged 14 advisors for selling illegal securities as part of a $415 million Ponzi scheme. The advisors promised investors returns as high as 14%, with 99% of it being risk-free. In reality, the investments were non-existent and unregistered. According to authorities, the advisors misrepresented the investments as high-interest bridge loans to commercial borrowers or businesses, with later investors funding redemptions of earlier ones. In all, 5,000 investors nationwide were affected in the four-year scam, whose originator was convicted and sentenced to 300 months in prison.

In another rogue story, a Virginia advisor has been sent to prison in connection with an investment scam that victimized retirees and parents who were saving to send their children to college. According to regulators, the advisor sold parents annuities that he falsely claimed were insured by the Federal Deposit Insurance Corporation. Instead of investing client funds, the advisor used the money to pay for an infomercial and to pay back prior investors. For his crime, the advisor will serve 58 months in prison.

And, finally, an Indianapolis advisor will serve 10 years and one month in prison for scamming 67 investors out of more than $7 million, according to prosecutors. The advisor never invested client money as promised, instead using it to pay for a Barbados condo and for jewelry for his wife. He also used assets from later investors to cover earlier investor redemptions. In addition to serving time in prison, the advisor must also make restitution of $7.1 million and serve five years of supervised release.