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Advisor Sentenced to Over 6 Years in Prison: Enforcement

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A South Carolina-based advisor was sentenced to 75 months imprisonment and five years supervised release for securities fraud, according to a statement released by U.S. Attorney Sherri Lydon.

In 2007, Melvin Leonard Wimmer Jr. started an investment firm in Greenwood, South Carolina called Cornerstone Capital (not affiliated with Cornerstone Capital Group, based in New York).

From 2010-2017, approximately 25 individuals invested $3.6 million with Wimmer. The investigation established that Wimmer pooled the money into one bank account, and he invested in high-risk securities and futures contracts.

Wimmer issued fraudulent account statements to his investors, according to Lydon. Soon after he started trading options and futures, Wimmer lost money, and he continued to lose money throughout the scheme.

In the statement, Lydon noted that “this prosecution illustrates the devastating impact that financial fraud inflicts on many Americans. Sadly, many of the victims in this case are elderly and lost all of their retirement savings. A free-market system cannot function without integrity in the financial markets.”

Instead of reporting the losses, Wimmer emailed his investors monthly account statements that falsely listed gains of 8% to 10% on an annualized basis.  Wimmer manufactured and distributed false account statements from the outset, and he continued until the scheme collapsed. Wimmer also falsely represented the expected gains from trading, including the past performance of his trades, and he failed to inform the investors of the high risk of trading futures and options.

Of the $3.6 million invested, Wimmer lost approximately $3 million.  Much of this money came from the investors’ retirement savings.

In addition to the prison sentence, the court also ordered Wimmer to pay more than $3 million in restitution.

In a letter submitted to the courts prior to sentencing, Wimmer wrote that he was “extremely remorseful for my actions and the losses incurred as a consequence of my poor decisions. In addition, the emotional and physical stress that I have caused others is inexcusable.”

According to BrokerCheck, in August, the Securities and Exchange Commission barred Wimmer from acting as a broker or investment adviser or otherwise associating with firms that sell securities or provide investment advice to the public. FINRA also barred Wimmer from acting as a broker or otherwise associating with a broker-dealer firm.

Advisor Convicted of Burglary, Stalking Faces Interim Suspension of CFP Mark

The Certified Financial Planner Board of Standards imposed an automatic interim suspension of Raymond Erker’s CFP certification, which was effective Sept. 28.

The board received evidence that Erker was convicted by a jury in Ohio of two felonies: burglary and menacing by stalking.

According to the CFP database and LinkedIn, Erker was CEO of SageGuard Wealth Management. SageGuard’s website is no longer licensed. As of Oct. 5, Erker is still registered with the SEC as an investment adviser representative.

Prior to SageGuard, Erker had been registered as a broker and worked at firms like LPL Financial — where he was discharged for borrowing money from a customer without following firm policy — and Merrill Lynch, according to BrokerCheck.

Pursuant to CFP Board’s Disciplinary Rules and Procedures, “[a]n interim suspension shall immediately be issued without a hearing when CFP Board Counsel receives evidence of a conviction … felony conviction for any crime.”

Erker’s right to use the CFP certification marks is suspended pending CFP Board’s completed investigation and possible further disciplinary proceedings.

SEC Charges DC-Area Real Estate Developer With Fraud

The SEC charged a Virginia real estate developer with skimming investor funds that were intended for use in purchasing an office building near the site of a planned commuter rail station on the Washington Metropolitan Area Transit Authority’s Silver Line.

The complaint also alleges commingling and misappropriation of investments in various real estate and other projects.

As alleged in the SEC’s complaint, over at least a four-year period, Todd Elliott Hitt used two of his companies — Kiddar Capital LLC and Kiddar Group Holdings Inc. — to raise more than $20 million from investors for the purpose of acquiring and operating the Silver Line office building, new home construction in Northern Virginia, and a fund managed by Hitt that invested in a startup business.

The SEC alleges that Hitt made misrepresentations about his own investments in the ventures and misappropriated several million dollars of investor funds to support his extravagant lifestyle and make Ponzi-like payments to prior investors.

As part of his settlement with the SEC, the terms of which remain subject to court approval, Hitt consented to entry of a judgment freezing his assets and imposing conduct-based injunctions that enjoin him from participating in the offer or sale of interests in real estate development companies.

Hitt also has consented to the appointment of a receiver over a number of the corporate defendants and relief defendants. Under the terms of the proposed settlement, the receiver would protect investors, prevent asset dissipation and loss, and attend to the businesses.  Penalties and disgorgement would be determined by the court at a later date.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of Virginia announced criminal charges.

Man Who Traded Pharma Stock on Tips From Wife Convicted in Criminal Case

The SEC announced Harold Altvater was convicted on three counts of securities fraud after a criminal trial before a jury. Altvater was indicted for insider trading in the stock of Cambridge-based Ariad Pharmaceuticals based on nonpublic information he received from his wife, an Ariad employee at the time.

The SEC previously charged Altvater and two other individuals with insider trading in civil actions. The criminal charges against Altvater are based on the same conduct underlying the SEC’s action against him.

The SEC’s complaint alleged that on three occasions between October 2013 and January 2014, Altvater traded in Ariad’s stock in advance of announcements about the safety profile and FDA approval status of Ariad’s only FDA-approved drug.

By purchasing shares ahead of a positive announcement, and selling shares ahead of negative announcements, Altvater allegedly avoided losses and obtained insider trading profits totaling $102,026. Further, the SEC’s complaint alleged that Altvater tipped a friend, who also profited by trading Ariad stock on the basis of non-public information learned from Altvater’s wife.

The SEC’s action against Altvater is ongoing. The SEC is seeking a permanent injunction, disgorgement plus prejudgment interest and a civil penalty.

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