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SEC Charges Advisor With Stealing $900K From a Client: Enforcement

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The Securities and Exchange Commission charged a Chicago-area investment advisor representative on Tuesday with misappropriating more than $900,000 from a client’s account through more than 40 unauthorized transactions.

The SEC’s complaint, filed in federal court in Chicago, alleges that William P. Carlson Jr., an investment advisor representative associated with a registered investment advisor, forged a client’s signature on check and journal requests and caused checks to be issued from the client’s account to a third party who gave the proceeds to Carlson.

According to the SEC, Carlson also directed that checks made payable to the client be issued from the client’s account, and then intercepted those checks, forged the client’s endorsement on those checks, and deposited the checks into his own account. In submitting these fraudulent check requests, Carlson repeatedly caused securities held by the client to be sold to fund the unauthorized withdrawals.

The SEC seeks a permanent injunction, disgorgement, prejudgment interest and civil money penalties. In a parallel action, the U.S. Attorney’s Office for the Northern District of Illinois filed criminal charges against Carlson.

Former Investment Banker Sentenced to 3 Years in Prison for Insider Trading

Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York sentenced former investment banker Sean Stewart to three years imprisonment on Feb. 17, according to the SEC.

Stewart was criminally charged on May 14, 2015. The charges arose out of the same conduct alleged by the SEC in a complaint filed the same day.

The SEC’s complaint alleges that, in a scheme spanning at least four years, +Stewart illegally tipped his father, Robert K. Stewart, about future mergers and acquisitions involving clients of two investment banks where Sean Stewart worked. The complaint alleges that his father, a certified public accountant, cashed in on the tips by placing and directing highly profitable securities trades ahead of the public announcement of these corporate transactions, generating approximately $1.1 million in illicit proceeds.

On Aug. 12, 2015, Robert Stewart pled guilty to conspiracy to commit securities fraud. On Aug. 17, 2016, Sean Stewart was convicted of insider trading and related charges.

The SEC’s litigation against the Stewarts, which was stayed pending resolution of the criminal action, is ongoing. The SEC seeks an injunction from further violations of the charged provisions of the federal securities laws, disgorgement of ill-gotten gains, civil penalties, and an officer and director bar against Robert Stewart.

SEC Charges Forex Trader With Bilking Clients to Buy Lingerie, Fast Food

The SEC charged Steve H. Karroum (aka Mustapha Karroum) and his company FX & Beyond Corp. with defrauding investors out of $1.7 million in a foreign exchange trading program. The SEC’s complaint, which was filed in federal court in Virginia, alleges that, from 2007 to 2014, Karroum and his company falsely claimed that Karroum could conduct forex trading without loss. Karroum allegedly told investors their funds would be used for forex trading and would be kept “safe.”

According to the complaint, while Karroum used some funds for forex trading, after 2010, Karroum stopped sending investor money to his forex broker for trading even though he continued to solicit new investors. Instead, the SEC says he allegedly used investor funds for undisclosed purposes, including making Ponzi-like payments to investors, paying unrelated business expenses, and misappropriating funds for his and his wife’s personal use or benefit, such as for purchases at Victoria’s Secret, the Disney Store, Gymboree, Papaya Clothing, McDonald’s, and Joseph A. Bank, and to pay premiums on his life insurance policy.

In addition, as alleged in the complaint, from late 2013 until November 2014, Karroum hid trading losses from his investors. In total, at least 14 investors lost approximately $1.7 million of their principal.

The complaint seeks injunctive relief, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties. The complaint also names as a relief defendant Karroum’s wife, Sahar Karroum (aka Sahar Mohammad Jamil Al Bouhairy), for the purpose of recovering funds that were unlawfully used for her benefit.

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