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Regulation and Compliance > Federal Regulation > SEC

SEC Charges San Antonio Advisor in $58M Investment Scam

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What You Need to Know

  • Nearly 300 investors invested $58 million in the funds.
  • Investors were told the funds would invest in life insurance policies and deeproot-related businesses.
  • The advisor used some of the money for personal expenses including two weddings and a divorce.

The Securities and Exchange Commission on Friday charged San Antonio-based investment advisors Robert J. Mueller and deeproot Funds LLC, along with Policy Services Inc., with defrauding nearly 300 investors out of $58 million.

According to the SEC order, Mueller and deeproot persuaded investors, many of whom were retirees, to cash out annuities and individual retirement accounts they held with other investment companies and invest in two pooled investment funds they advise.

Mueller and deeproot told investors the funds — the deeproot 575 Fund, LLC and the deeproot Growth Runs Deep Fund, LLC — would invest in life insurance policies and deeproot-related businesses to provide relatively safe returns to investors.

Mueller created the funds in 2014.

From at least September 2015 to at least February 2021, Mueller and deeproot defrauded two investment funds they advise and nearly 300 people who invested roughly $58 million in the funds, according to the SEC.

The regulator says Mueller paid himself roughly $1.6 million from 2016 through 2020 using investors’ funds.

“Mueller also used more than $1.5 million of the Funds’ assets to pay hundreds of personal expenses, including his daughter’s private school tuition, vacations with his family, his second wedding, his second divorce, his third wedding, jewelry for both his second and third wives (including engagement rings and wedding bands for both wives), other lifestyle spending for and by his family, and to buy a condominium in Kauai, Hawaii,” the SEC said in its statement.

“When asked by SEC counsel during investigative testimony about his use of the Funds’ assets to pay for these personal and family expenses, Mueller asserted his Fifth Amendment right against self-incrimination.”

Mueller is a member of the State Bar of Texas.

“While Defendants raised more than $58 million from investors in the 575 Fund and the dGRD Fund, they commingled the money in deeproot and Policy Services bank accounts and spent less than $10 million to purchase life insurance policies for the Funds,” the order states.

The defendants, the order continues, “also purported to include life insurance policies as assets of the Funds that Mueller and Policy Services had purchased for Mueller’s earlier investment funds. Notably, Defendants purchased no new insurance policies for the Funds after September 2017, despite raising approximately $43 million for the Funds after that time.”

The order states that defendants used the vast majority of the funds’ assets — virtually all of which came from investors in the 575 Fund and the dGRD Fund — “like a piggy bank to fund Mueller’s deeproot-affiliated businesses.”

Indeed, Mueller, the order states, “funneled more than $30 million of the Funds’ assets to the Relief Defendants in non-arms-length transactions whenever he determined the Relief Defendant businesses had expenses that needed to be paid, and he did so without any analysis as to whether such transfers constituted suitable investments for his client Funds.”