Ex-Wells Fargo Rep Arrested, Charged With Stealing $2.9M

Welsh had been entrusted to manage the client funds responsibly but instead “perpetrated a scheme to defraud the five clients by diverting money from their brokerage accounts to accounts under his control,” Honig alleged.

Welsh then used the unlawfully obtained funds to pay for his gambling and to “fund extravagant personal expenses, including luxury gifts and items,” according to the complaint. Some of the funds were used to pay for gold or coins, the complaint alleged.

If found guilty on all counts, Welsh faces a maximum prison sentence of 85 years. Each of the wire fraud counts carries a maximum potential penalty of 20 years in prison and a $250,000 fine, or twice the gross gain or loss from the offense, whichever is greatest, according to Honig. The investment advisor fraud count carries a maximum potential penalty of five years in prison and a $10,000 fine, or twice the gross gain or loss from the offense, whichever is greatest, Honig said.

Older Clients Among Victims

At least two of the five clients were older adults, according to the SEC complaint, which noted one was 88 years old and another 76.

“Welsh fraudulently obtained at least 14 checks drawn on clients’ and customers’ accounts at Financial Institution A to buy gold coins and other valuables for himself, as well as to pay for his own personal expenses,” the SEC complaint alleged. The purchases included other precious metals and funds were funneled to family credit card accounts that Welsh controlled, according to the SEC.

Welsh misappropriated at least $268,740 from his clients using those fraudulently obtained checks, the SEC complaint said. Three clients were victims of that specific, check-based scheme. In at least seven cases, the checks were paid to a New Jersey coin and stamp dealer to buy gold coins and other precious metals, the SEC alleged. “Welsh kept these coins for himself,” the complaint alleged.

He “frequently sold securities in his clients’ and customers’ accounts — sometimes only days before the fraudulent transfers — so that cash would be available in the accounts for him to steal,” the SEC alleged. “Welsh did not disclose to his victims that the purpose of these securities sales was to facilitate his scheme, rather than to maximize their investment returns and total assets.”