Close Close
ThinkAdvisor

Regulation and Compliance > Litigation

Ex-Broker Gets 35 Years in Prison for $25M Scam Targeting Seniors

X
Your article was successfully shared with the contacts you provided.

What You Need to Know

  • The former Capitol Securities Management broker was barred from the industry by FINRA in 2010.
  • He allegedly ran a nationwide investment fraud scheme that resulted in more than $25 million in losses to over 300 victims, most of whom were elderly.
  • One week ago, his attorney was sentenced to 10 years for his role in the same scheme.

A former Capitol Securities Management broker was sentenced Monday to 35 years in prison for his role in a nationwide investment fraud scheme that resulted in more than $25 million in losses to over 300 victims, most of whom were older adults, according to court documents and Raj Parekh, acting U.S. Attorney for the Eastern District of Virginia.

The ex-rep’s Williamsburg, Virginia-based attorney was sentenced last week to 10 years in prison for his role in the same scam, after being convicted on multiple charges of conspiracy, mail fraud and sale of unregistered securities, Parekh pointed out.

Daryl Bank, 51, of Port St. Lucie, Florida, ran an investment fraud scheme from about January 2012 through July 2017, based in the Tidewater area of Virginia and Port St. Lucie, and operating across the country, according to court documents.

Bank was a broker at Capitol Securities Management from January 2008 until February 2010, when he was barred from the securities industry by the Financial Industry Regulatory Authority, according to his report on FINRA’s BrokerCheck website.

Capitol Securities Management did not immediately respond to a request for comment about Bank’s sentencing on Friday.

In 2015, Bank and several of his entities were named by the Securities and Exchange Commission as fundraising entities that were involved with defrauding investors in an alleged scheme that raised more than $12.4 million from investors involving applications to the Federal Communications Commission for cellular spectrum licenses.

Barred by FINRA

Bank and an accomplice allegedly misappropriated about $161,000 in commissions and other payments belong to his member firm for their own personal use, according to a disclosure on his BrokerCheck report.

Bank then entered false information concerning securities transactions on the business records of his firm, “willfully causing” the firm to maintain inaccurate books and records, the disclosure said.

When FINRA investigated, Bank allegedly provided false information in response to requests for information and provided false and misleading testimony under oath during a FINRA on-the-record interview.

‘Cruel Indifference’

Bank and his co-conspirators — including his attorney, Billy Seabolt, 56, of Williamsburg; corporate executive Raeann Gibson, 49, of Florida; and salesman Roger Hudspeth, 52, of Chesapeake — allegedly deceived hundreds of unsuspecting investors, most of whom were at or near retirement age, by fraudulently convincing them to invest in firms owned and controlled by Bank.

At Bank’s direction, his co-conspirators allegedly stole significant portions of investment contributions by their victims to fund a criminal enterprise and Bank’s lifestyle.

“Darryl Bank and Billy Seabolt, along with their co-conspirators, robbed hundreds of elderly victims of their life savings and ruined the financial security many had worked for all their lives,” according to Brian Dugan, special agent in charge of the FBI’s Norfolk Field Office. “Their actions caused needless hardships and were taken with cruel indifference to the long-lasting impact on their victims.”

Despite being barred by FINRA, Bank allegedly created an investment company called Dominion Private Client Group and continued to sell unregistered securities on his own and via insurance sales reps across the U.S.

Seabolt, whose legal practice was otherwise focused on elder and trust law, served as Dominion’s legal counsel and was allegedly involved in negotiating and developing many of the fraudulent investments and corporations.

The conspirators allegedly made material misrepresentations and omissions to sell illiquid, highly speculative investment vehicles.

Based on those fraudulent representations, the investors cashed out of 401(k) and other retirement accounts to buy into Bank’s investments, without knowing he immediately transferred 20%–70% of their funds to other companies he controlled in the form of purported “fees,” much of which he allegedly ended up spending on luxury and designer goods.

Bank was convicted on all 27 counts submitted to the jury, including conspiracy, mail and wire fraud, selling unregistered securities, securities fraud and money laundering.

Hudspeth pleaded guilty to investment advisor fraud and money laundering, and was sentenced to more than 12 years in prison in May 2018.