The Securities and Exchange Commission charged Texas resident William Neil “Doc” Gallagher — the self-styled “Money Doctor” featured on three Dallas-area radio stations — in an emergency action to shut down a $19.6 million Ponzi scheme targeting elderly investors’ retirement funds.

The SEC also charged Gallagher Financial Group and W. Neil Gallagher, Ph.D. Agency Inc., two companies that Gallagher used to carry out the scheme.

The SEC’s complaint alleged that Gallagher made frequent religious references on his radio shows to establish his standing among a target audience of retired Christian investors. He repeatedly solicited listeners to call Gallagher Financial Group to schedule personal meetings with him to discuss retirement planning and obtain advice about risk-free income.

From December 2014 through January 2019, he raised at least $19.6 million from approximately 60 investors — ranging in age from 62 to 91.

Falsely claiming to be a licensed investment advisor, he offered an investment that he called a Diversified Growth and Income Strategy Account, and promised guaranteed, risk-free returns in their accounts ranging from 5% to 8% per year.

According to the SEC, Gallagher promised to acquire income-generating assets for his clients in five specified categories: U.S. Treasury securities, publicly traded stock, fixed indexed annuities, life settlements and mutual fund shares. In reality, except for one $75,000 annuity purchase, Gallagher purchased no assets in any of the five categories and no other assets to back the promised returns.

Instead, he exhausted virtually all investor funds on spending unrelated to the accounts. He used at least $5.8 million to make monthly Ponzi payments to investors. He also directly misappropriated investor funds, including nearly $3.2 million to pay personal expenses, payroll and radio expenses to attract new investors.

Despite raising at least $19.6 million — and as much as $29.2 million — from investors, the Gallagher-controlled bank accounts held a combined balance of only $821,951 as of Jan. 31, 2019.

To lull investors and conceal the scheme, Gallagher provided investors phony account statements showing false account balances.

A judge entered orders at the SEC’s request, freezing Gallagher and his companies’ assets and placing them into receivership and temporarily enjoining the defendants from further violations. The SEC is seeking preliminary, permanent and conduct-based injunctions as well as disgorgement, prejudgment interest and civil penalties against the defendants.

In a related case, the Dallas County District Attorney’s Office obtained an indictment against Gallagher for securities fraud and other criminal charges stemming from the scheme. Gallagher was arrested on those charges, which remain pending.

Wedbush Fined for Failure to Supervise

Wedbush Securities Inc. will pay a $250,000 penalty and has agreed to be censured to settle its failure to supervise charge in a pending administrative proceeding, according to an announcement from the SEC.

According to the SEC’s order instituting proceedings, Wedbush ignored numerous red flags indicating that one of its registered representatives was involved in a long-running pump-and-dump scheme targeting retail investors. Wedbush conducted two flawed and insufficient investigations into the registered representative’s conduct, and failed to take appropriate action, the SEC said.

The settlement acknowledges remedial measures taken by Wedbush since March 2018, including changes made to senior leadership, revised policies and procedures, improved electronic surveillance, and the allocation of additional resources to internal and audit controls groups.

“Wedbush abandoned important responsibilities to its customers by looking the other way in the face of mounting evidence of manipulative conduct,” said Marc P. Berger, director of the SEC’s New York Regional Office. “After we filed our claim, Wedbush made significant changes aimed at reforming its practices to detect and report misconduct within its ranks.”

SEC Charges 9 Individuals and Companies for Roles in Microcap Scheme

The SEC announced charges against nine individuals and companies in a multimillion-dollar stock distribution and market manipulation scheme involving two microcap companies, NanoTech Entertainment, Inc. and NanoTech Gaming, Inc.

The SEC’s complaint alleges that David Foley, the founder of the NanoTech companies, orchestrated a scheme to manipulate trading in their stock and perpetrated some aspects of the scheme while serving out a prison sentence in two unrelated cases.

As part of the scheme, Foley allegedly hired Bennie Blankenship, who promoted the NanoTech companies on Twitter and YouTube and to an investor group he cultivated on social media, and engaged in manipulative trading with Foley. Foley also allegedly prepared false quarterly financial statements for the NanoTech companies.

According to the SEC’s complaint, from February 2014 through October 2016, Foley acquired more than a billion shares of the NanoTech companies’ stock through the conversion of notes issued to himself, and then sold the stock to River North Equity LLC, a securities trading company, in a series of unregistered transactions. River North and its president, Edward Liceaga, then allegedly sold these shares to the public. Michael Chavez, a River North employee, acted as an unregistered broker for these sales.

David Foley’s wife, Lisa, completed over half of the sales of stock to River North, with the assistance of Jeffrey Foley, David’s brother, and Chavez. David and Lisa Foley funneled some of their profits from these stock sales back to the NanoTech companies.

The complaint seeks equitable and monetary relief.

SEC Charges Attorney in False Legal Opinion Scheme

The SEC charged an attorney with fraud for concealing from transfer agents and brokerage firms her involvement in preparing legal opinion letters concerning the sale of certain microcap securities.

The SEC alleges that the attorney, Diane Dalmy, had been placed on the prohibited attorneys list maintained by OTC Markets Group, Inc., which owns and operates the largest U.S. electronic quotation and trading system for microcap securities.

To evade the consequences of this prohibition, Dalmy allegedly recruited a retired divorce lawyer, who signed legal opinion letters drafted by Dalmy without performing due diligence or conducting any legal analysis and then sent them on to the firms.

The SEC alleges that legal opinion letters are a significant factor in transfer agents’ and brokerage firms’ decisions to deem certain securities eligible to be freely sold on the public market without SEC registration, and that transfer agents and brokerage firms often refuse to accept legal opinion letters from attorneys subject to OTC Markets prohibitions.

The SEC further alleges that, in 2016, Dalmy was permanently suspended from appearing and practicing before the SEC as an attorney, which prohibited her from representing clients in SEC matters, including investigations, litigation, or examinations, and from advising clients about SEC filing obligations or content.

Despite this, the SEC alleges that Dalmy continued to prepare filings for publicly traded companies and directed the other attorney to file them with the SEC.

The SEC’s complaint seeks a conduct-based injunction prohibiting Dalmy from providing legal services pertaining to federal securities law exemptions from registration and requiring her to provide actual or potential clients seeking advice or representation in matters related to the federal securities laws with copies of the SEC’s prior actions against her. The complaint also seeks disgorgement of ill-gotten gains plus interest and a penny stock bar.