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Industry Spotlight > Broker Dealers

SEC Shakes Off Ex-LPL Rep Over Taylor Swift Scam

By Jeff Berman

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The Securities and Exchange Commission has barred a former LPL Financial broker in New Hampshire over a scam in which he allegedly solicited $576,000 from three clients, falsely claiming their funds would be used to invest in a lucrative investment project in Africa that pop music artist Taylor Swift and Microsoft co-founder Bill Gates were involved in.

“We are getting close, a week, maybe two, I just had a long talk with Taylor about it in the middle of the night lol,” the broker wrote to a client in a text message, according to the state securities bureau. ”We need $30k this week to finish the project in Africa so we all get paid big,” the broker texted the client in another message. “I can come up with $20k, but I’m $10k short, so you have it? If not, no worries, but Taylor asked me to personally ask you, lol, she likes you! Let me know.”

In a recent order, the SEC said it accepted an offer of settlement by Dain F. Stokes, 60, of Fremont, New Hampshire, in which the ex-LPL rep agreed to be barred from association with any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agent or nationally recognized statistical rating organization; and also agreed to be barred from participating in any offering of a penny stock in any capacity.

LPL did not immediately respond to a request for comment Friday. Stokes worked as an advisor and registered representative in LPL’s Bedford, New Hampshire, office from June 2009 to August 2019, according to the SEC. According to the Financial Industry Regulatory Authority’s BrokerCheck website, LPL discharged him Aug. 28, 2019, in connection to the state of New Hampshire suspending his advisor agent and broker-dealer rep license.

In November 2019, the New Hampshire Bureau of Securities Regulation issued an Amended Order of Summary Suspension, Order to Cease and Desist against Stokes, claiming he defrauded three investors as part of his scam. The order suspended Stokes’ investment adviser agent and broker-dealer representative license and also permanently barred him from any securities licensure in New Hampshire. The order also required Stokes to cease and desist from further violations of New Hampshire securities laws, pay restitution of $576,000, pay an administrative fine of $20,000, and pay the cost of the investigation.

According to the the New Hampshire Bureau of Securities Regulation, between 2018 and 2019, Stokes solicited $576,000 in investor funds from three investors that were his long-term LPL clients, falsely stating to them that their funds would be invested in a lucrative investment project in Africa that earned a 20% return in 90 days. Stokes allegedly did not use the money for any investment, and instead misappropriated portions of the funds for personal expenses, the Bureau claimed. “Multiple thousands of dollars also appear to be wired by Stokes to various people and entities located all over the United States,” according to the Bureau.

Citing a police report, the Bureau said Stokes approached “Investor #1” for an investment in an “outside project” for “Shake It Off” singer Taylor Swift where Stokes was in charge of the “financial end.” On Aug. 8, 2018, Investor #1 wrote a check made payable to Stokes personally for $130,000 and Stokes executed an unsecured promissory note on the same day promising a 20% return by Nov. 8, 2018, the Bureau said, adding the unsecured promissory note indicated the money was for a personal loan.

“According to the police report, Investor #1 said that, ‘despite the way it was written up on the paperwork,’ it was an investment,” and those funds “were not paid back by November 8, 2018 as promised and still remain outstanding as of the date of this Petition,” the Bureau said, adding that same LPL client went on to invest more money in the project. Investors #2 and #3 were identified as a husband and wife.

The Bureau ordered Stokes to pay restitution to Investor #1 in the amount of $201,000 and to Investors #2 and #3 in the amount of $375,000.

In its initial order in August 2019, the Bureau cited just one investor who was allegedly defrauded by Stokes.

Jeff Berman

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