The Securities and Exchange Commission has charged an East Longmeadow, Massachusetts, advisor with defrauding two advisory clients by persuading them to invest $300,000 in what it said was an “apparent scam” that originated in Turkey.
The SEC filed an enforcement action against Richard G. Duncan in U.S. District Court for the District of Massachusetts on Monday, claiming he violated his fiduciary duty as an investment advisor by ignoring, and failing to disclose, warnings from two banks that a Turkish investment opportunity he presented to at least two elderly retail investors was probably a scam.
Duncan also made materially false and misleading statements to at least one of the clients, promising as much as a 100% return on the Turkish investment, the SEC said in announcing the action.
The complaint alleged Duncan violated the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, and seeks permanent injunctions, civil penalties and disgorgement plus prejudgment interest against Duncan.
Duncan was a registered broker with LPL Financial from 1989 to 2009, according to his BrokerCheck profile. He was also registered as an investment advisor representative (IAR) with LPL from March 4, 2006, until he left in 2009, according to his IAR Public Disclosure Report. After that, he was registered as an IAR with Bradway Financial from December 2009 until April 27, 2017, and then as an IAR with Ausdal Financial Partners from May 3, 2017, until April 4, 2019, the report shows.
However, that report says he was terminated by Ausdal on March 29 this year for “failure to follow firm policies and procedures regarding loans with clients and lack of timely notification of a break-in at his branch.”
Ausdal and Duncan’s attorney, Charles Dolan of the Raipher, P.C. law firm in Springfield, Massachusetts, didn’t immediately respond to requests for comment.
The “so-called opportunity” that Duncan presented to his clients “consisted of sending funds to Turkey based on an elaborate hoax,” according to the SEC’s complaint against him. Duncan told his clients and various third parties that a woman living in Turkey expected to inherit as much as $6 million from her dead father, and claimed that he would be able to manage that money if he provided the woman with money for legal expenses, the SEC said. Duncan steered at least two elderly retail investors to invest in the “illusory jackpot, promising them a return of as much as 100% if they helped to secure the release of the funds,” according to the complaint. One of his longtime clients provided about $250,000, while another client gave $28,100, and the money was sent to several people in Turkey and the U.S. who were supposedly helping the woman in Turkey, the SEC charged.
Duncan’s clients still haven’t received any of the promised returns on their investment, according to the complaint. Instead, their money was “lost to this international scam,” the SEC said in the complaint.
“As an investment adviser, Duncan owed his advisory clients an affirmative duty of the utmost good faith, and he was required to make full and fair disclosure of all material facts and to employ reasonable care to avoid misleading his clients,” the SEC said, adding: “Leaving aside the facial implausibility of the story, Duncan failed to obtain any documentation establishing the identity of the woman in Turkey and confirming the existence of legal proceedings involving the estate of the woman’s father. He failed to obtain any documentation memorializing any financial interest that his clients received in the purported estate. He also ignored — and failed to inform his clients about — several bright red flags, including warnings from two banks that the Turkish investment opportunity was probably a scam.”
The SEC is seeking a permanent injunction that restrains Duncan, along with his “agents, servants, employees, attorneys, and other persons in active concert or participation with them,” it said in the complaint. The SEC also wants the court to require Duncan to “disgorge his ill-gotten gains, plus prejudgment interest, with said monies to be distributed in accordance with a plan of distribution to be ordered” by the court, it said.