A former Morgan Stanley and Wells Fargo broker was sentenced on Tuesday to 30 months in prison for defrauding his clients out of more than $1.6 million, according to court documents.
The sentence was handed down by Judge Alvin K. Hellerstein in U.S. District Court for the Southern District of New York in Manhattan. The broker, Elias Herbert Hafen, was also ordered to pay $745,000 in restitution and to forfeit $806,750.
“At Wells Fargo Advisors we hold our advisors to the highest professional standards,” Wells Fargo spokeswoman Jackie Knolhoff told ThinkAdvisor on Friday. “The advisor involved in this matter is no longer with the firm,” she noted. Morgan Stanley declined to comment.
Hafen was affiliated with Morgan Stanley from 2009 to 2018, and then joined Wells Fargo in 2018, according to his profile on the Financial Industry Regulatory Authority’s BrokerCheck website. Wells Fargo, however, terminated him Aug. 21, 2018, after Hafen “admitted to entering into financial arrangements with clients that were not approved by the firm,” according to a disclosure on his BrokerCheck profile.
Hafen was guilty of defrauding at least 11 of his clients and their family members by “inducing” the victims to “wire money” to Hafen’s personal bank account based on his “false and misleading representations that the money was to be invested in securities,” Geoffrey Berman, U.S. attorney for the Southern District of New York, had claimed.
In fact, as Hafen “well knew, there were no securities” that he was investing their money in, according to the complaint. Instead, he was “misappropriating the funds for his own personal use,” Berman said.
Hafen on Sept. 4 withdrew his not guilty plea and instead entered a plea of guilty of investment advisor fraud as part of a plea agreement.
The Securities and Exchange Commission, which had filed a parallel civil case against Hafen for the same scam, declined to comment Friday on the ex-broker’s sentencing. The SEC had claimed Hafen’s scheme had been active “from at least July 2011 through April 2018.” Of the $1.6 million he scammed his clients out of, he had returned about $650,000 as of the time the SEC filed its claim Sept. 4, 2019, it said. The SEC’s complaint is still pending, according to its website.
FINRA barred Hafen from associating with any member firm in any capacity after he was suspended for failing to respond to a request for information and then didn’t request termination of his suspension within three months, according to BrokerCheck.
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