A California advisor agreed to plead guilty to one criminal count of wire fraud as part of a $3.3 million Ponzi scheme in which he defrauded investors and used most of their funds not for actual investments, but instead for his own personal purchases or to pay earlier investors in the scam, according to the U.S. Attorney’s Office for the Central District of California.
“When Brown enters his guilty plea, he will face a statutory maximum sentence of 20 years in federal prison,” the U.S. Attorney’s Office said Thursday.
The criminal information and a related plea agreement were filed Aug. 28 in U.S. District Court, Central District of California in Los Angeles, where Steven F. Brown, 52, of Marina del Rey, is scheduled to make his initial court appearance on Sept. 15.
In his plea agreement, Brown admitted he controlled and operated Alpha Trade Analytics, a financial consulting and investment company he mainly ran out of his home without being a registered broker or dealer in securities, according to the U.S. Attorney’s Office. Brown also served as the accountant for a nonprofit organization providing dance and theater arts education to kids and young adults in Los Angeles, and had access to its bank accounts, the U.S. Attorney’s Office said.
In a complaint filed Thursday in the same Los Angeles court, Brown was accused of, from at least February 2015 through March 2018, soliciting investments including from people he encountered through his position with his employer and via his relationship with its executives and employees, that gave him access to high-net-worth individuals. (As it turned out, the solicitations were actually made from April 2014 to May 2018, the U.S. Attorney’s Office said after the plea agreement.)
Brown raised at least $7.5 million from about 75 investors, promising them guaranteed monthly returns from the Alpha Fund, the complaint alleged. Brown, while serving as the investment advisor to the Alpha Fund, claimed the Alpha Fund would invest money in financial markets including trading securities, according to the complaint.
Using a small portion of investor funds, estimated to be about $212,000, the Alpha Fund bought and sold securities including short sales and trading on margin, according to the complaint. The Alpha Fund traded securities in 2015 using investor money, but the trading was not profitable, according to the complaint.