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Regulation and Compliance > Litigation

Barred Broker Sentenced to 5 Years in Prison Over $7M Ponzi Scheme

By Jeff Berman

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What You Need to Know

  • In addition to five years in prison, Lee D. Weiss was ordered to pay $7.5 million in restitution and a $250,000 fine for scamming his clients.
  • He was also sentenced to serve three years of supervised release after completing his five-year sentence.
  • Some of the clients' funds were used to make car, credit card and country club payments, as well as for tickets to Boston Red Sox games.

A former broker and advisor was sentenced on Tuesday to five years in prison after being convicted of investment advisory fraud. According to court documents, his clients lost more than $7 million under a Ponzi scheme.

Lee D. Weiss, 51, of Roslyn, New York, and Newton, Massachusetts, was also ordered to pay $7.5 million in restitution and a $250,000 fine, and to serve three years of supervised release.

In March, Weiss pleaded guilty to investment advisor fraud in connection with this scheme to defraud his clients.

“Mr. Weiss acknowledges that he breached his duties to his clients and deeply regrets the losses he caused them,” Lisa A. Mathewson, an attorney who represented him in the case, told ThinkAdvisor on Wednesday. “He has pledged to make restitution and looks forward to resuming that effort when he is released.”

Weiss was the principal of Family Endowment Partners, an investment advisor registered with the Securities and Exchange Commission, which had an office in West Chester, Pennsylvania, before it was closed by order of the SEC, Jacqueline C. Romero, U.S. attorney for the Eastern District of Pennsylvania, said in a news release Tuesday.

The SEC also barred Weiss from the industry in 2016, according to his report on the Financial Industry Regulatory Authority’s BrokerCheck website.

Weiss “used his position to fleece his own clients of millions of dollars through purported investments in a now-defunct Florida tobacco company and a series of private securities offerings,” according to the news release.

Weiss told his clients their money would be used for investment purposes when, in fact, ”he used their funds for everything from car payments, to country club fees, to payouts to previous investors,” Romero said.

Lee used some of his clients’ funds to make car and credit card payments and payments to his country club, as well as for tickets to Boston Red Sox baseball games, according to the original felony information filed April 29, 2020, in U.S. District Court for the Eastern District of Pennsylvania.

Weiss continued to lie to his clients about the value of their investments to prevent them from learning of his theft and to persuade them to continue paying him for “managing” their money, Romero said.

In 2015, the SEC charged Weiss and Family Endowment Partners with fraud for engaging in self-dealing and failing to disclose material facts to clients regarding conflicts of interest, use of investor funds, and the risks of the investments they recommended.

(Image: Shutterstock) 

Jeff Berman

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