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September 01, 2022 at 10:05 AM
What You Need to Know
- The SEC alleges that two executives, through Standard Advisory, fraudulently caused their advisory clients to engage in undisclosed related-party transactions.
- These transactions were not in the clients' best interest, the SEC says.
- The undisclosed transactions benefited the two men and their companies, according to the SEC.
The Securities and Exchange Commission has charged two North Carolina-based executives and their Malta-based RIA, Standard Advisory Services Ltd., for defrauding clients out of more than $75 million through undisclosed insurance transactions that benefited themselves and their companies.
According to the SEC’s complaint, from July 2017 through 2018, Gregory E. Lindberg and Christopher Herwig, through Standard Advisory, breached their fiduciary duties to their advisory clients by fraudulently causing them to engage in undisclosed related-party transactions that were not in the best interest of their clients.
The SEC’s complaint further alleges that the defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21.4 million in advisory fees generated in connection with the schemes.
“In an attempt to conceal the fraud, Lindberg allegedly orchestrated the schemes through complex investment structures and a web of affiliate companies and allegedly used the proceeds to pay themselves or to divert the funds to Lindberg’s other businesses,” the SEC said.
By 2017, according to the SEC’s compliant, Lindberg had acquired 100% ownership of four North Carolina insurance companies and a reinsurance trust, “which gave him control over hundreds of millions of dollars in premiums from their policyholders.”
While the funds “were supposed to be used to pay the policyholders’ insurance claims, Lindberg treated the funds as his own assets and used the money for any purpose he decided was in his best interest,” the complaint states.
Lindberg directed his insurance companies to enter into investment advisory services agreements with SASL, a Malta-based investment advisor he owned, the SEC said.
In another scheme, Lindberg and Herwig funneled millions of dollars of cash to Lindberg-owned affiliates by loading the balance sheet of another SASL advisory client, Private Bankers Life & Annuity Co., ”with prohibited or sham investments,” the complaint states.
