The SEC said Douglas Simanski had raised over $3.9m (£3m, €3.4m) from approximately 27 of his brokerage customers and investment advisory clients, many of them retired or elderly.
Details of fraud
The watchdog’s report said he invested their money in either a “tax-free” fixed-rate investment, a rental car company or one of two coal mining companies in which Simanski claimed to have an ownership interest.
He allegedly told investors to write cheques payable to personal bank and brokerage accounts he opened in his wife’s name. The complaint alleges that instead of investing the money as he promised, Simanski largely used it to repay other investors and for his personal use.
According to the complaint, the scheme collapsed when one of his clients contacted the Financial Industry Regulatory Authority (Finra) and Simanski admitted his scheme to his employer.
Kelly Gibson, associate regional director for enforcement in the SEC’s Philadelphia regional office, said: “This matter highlights the need for retail investors – and retirees and elderly individuals, in particular – to remain sceptical of investments that sound too good to be true and confirm that investments recommended by brokers and investment advisers are approved for sale by their respective brokerage or advisory firms before transferring funds.”
In a parallel action, the US Attorney’s Office for the Western District of Pennsylvania has said that Simanski pleaded guilty to criminal charges.
The SEC’s complaint, filed in federal court in Johnstown, Pennsylvania, charges Simanski with violating antifraud provisions of the federal securities laws.
Simanski has agreed to settle the charges against him. The settlement, which is subject to court approval, “orders injunctive relief and disgorgement of ill-gotten gains plus interest”.
He also agreed to the entry of an SEC order that, when entered, will bar him from the securities industry for the rest of his life.