Close Close

Regulation and Compliance > Litigation

Ex-Merrill Broker Arrested Over Charges Tied to $1M Scam

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • The former Merrill Lynch advisor and broker was charged with wire fraud, investment advisor fraud and money laundering.
  • If convicted, he faces up to 20 years in prison.
  • The SEC previously filed a complaint against him and his New York firm, Battery Private.

A former broker and advisor who started his own independent advisory firm after leaving Merrill Lynch was arrested Monday in Southampton, New York, and charged with wire fraud, investment advisor fraud and money laundering tied to a scheme to misappropriate more than $1 million from current and prospective clients, according to the Justice Department.

According to an indictment filed last week in U.S. District Court for the Eastern District of New York in Central Islip and unsealed on Monday, Jeffrey L. Slothower, 43, of Southampton, allegedly wooed a California married couple whose money he managed at a previous firm to sign investment advisory contracts with his firm, Battery Private.

The Scheme

Slothower allegedly promised the victims he could beat any rate of return they were receiving  without market risk and convinced them to let him invest their money in bonds backed by homeowner’s association fees.

Between Jan. 25, 2017, and Jan. 27, 2017, “Victim-1” allegedly sent more than $500,000 to Slothower to be invested in the purported HOA bonds, according to DOJ.

But the money was not invested in HOA-backed bonds or held in “capital reserves;”  instead, Slothower used the funds to, among other things, “wire money to himself, purchase a luxury automobile and pay fees for a private golf club on Long Island,” according to DOJ.

“Victim-2” allegedly agreed to invest in the same purported bonds and, in or around December 2017, also sent more than $500,000 to Slothower to invest. However, Victim-2’s money was used to, among other things, pay personal credit card bills, according to DOJ.

In June 2018, Victim-1 made another investment of about $84,000 that Victim-1 believed was for the purported HOA-backed bonds. But Slothower allegedly used the money to instead to, for instance, make purported quarterly payments to Victim-1 and Victim-2 that were falsely represented as their investment returns and to pay a private golf club on Long Island, according to DOJ.

Slothower made his initial appearance in a videoconference Monday before U.S. Magistrate Judge Steven L. Tiscione. If convicted, he faces up to 20 years in prison, according to Breon Peace, U.S. Attorney for the Eastern District of New York, and Michael J. Driscoll, assistant director-in-charge of the Federal Bureau of Investigation, N.Y. Field Office (FBI), who announced the arrest and charges.

SEC: Two Separate Fraud Schemes

The Securities and Exchange Commission filed a complaint against Slothower and Battery Private in the same court on Aug. 13, alleging Slothower engaged in two separate fraudulent schemes.

In the first scheme, starting in 2016 and lasting through at least June 2018, Slothower misappropriated about $1.18 million from an advisory client and her then-spouse, a prospective advisory client, according to the complaint.

In the second scheme, beginning in about April 2018 and going on until at least December 2019, Slothower made misrepresentations and omissions in connection with private sales of a penny stock owned by Battery Private, the SEC alleged.

He also allegedly exaggerated Battery Private’s assets under management on the firm’s Form ADV filings in order to represent that Battery Private was an SEC-registered advisor.

Slothower worked for Merrill as a broker from March 2010 through January 2016, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website. He then became a broker for Private Client Services.

Merrill and PCS did not immediately respond to requests for comment on Tuesday.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.