A California advisor has agreed to be barred from the industry and pay a total of $1 million to settle claims that he misled clients about the terms of their investments with him and his firms by concealing conflicts of interest, according to the Securities and Exchange Commission.
In a complaint filed Aug. 14, 2019, in U.S. District Court for the Central District of California, the SEC had claimed Craig Rumbaugh advised clients of his RIA Rumbaugh Financial to invest in promissory notes offered by Susan Werth, who claimed to provide short-term high interest rate loans to real estate developers.
However, “unbeknownst to Rumbaugh,” Werth was operating a Ponzi scheme, the SEC alleged. Rumbaugh did not immediately respond to a request for comment Wednesday.
According to the complaint, from August 2015 to June 2016, Rumbaugh persuaded eight clients to invest a total of more than $3 million with Werth’s companies. Three of those clients lost a total of more than $650,000 as Werth’s Ponzi scheme collapsed, the SEC claimed.
The complaint alleged Rumbaugh and his entities concealed commissions totaling $140,000 that Werth paid Rumbaugh on funds raised from his clients.