The Securities and Exchange Commission charged an advisor in Manchester, Connecticut, with defrauding a retired couple who were longtime clients out of nearly all the value in their investment portfolio.
In a complaint filed Thursday in the U.S. District Court for the District of Connecticut, the SEC alleged that, in 2018, Hai Khoa Dang “gained complete control over the couple’s brokerage accounts and lied to them as he pursued an aggressive stock options trading strategy without the knowledge or informed consent of his clients.”
Within only 10 months, “Dang’s unauthorized options trading depleted virtually all $2.2 million of their retirement savings” and, as he was “losing the couple’s retirement savings, he repeatedly misled the couple about how much money they had lost and the causes of the losses,” according to the complaint.
The trading caused the value of the couple’s accounts to tumble from more than $2.2 million to about $27,000 between February 2018 and November 2019, according to the SEC.
Dang led the couple to believe he would invest most of their investment portfolio conservatively and would retain a minimum of $250,000 in cash in their accounts, the regulator said.
The complaint alleged that Dang misrepresented that the value of the client’s positions were not reflected in the brokerage account statements.
Dang also allegedly misrepresented to the clients that he was associated with a registered broker-dealer, when, in fact, Dang’s securities licenses had all lapsed and his last affiliation with any registered entity was in 2006, according to the SEC.
Dang was last registered through his association with Cetera Financial Group-owned Investors Capital Corp., between 2003 and 2006, according to the Financial Industry Regulatory Authority’s BrokerCheck website. He did not tell the couple that he was no longer registered, according to the SEC.
As a result of his actions, Dang violated the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, the SEC said.
The regulator is seeking a permanent injunction, disgorgement plus prejudgment interest and a civil penalty.