Investment advisers have become a primary focus of Commission enforcement actions in recent years. The trend began several years ago and continues. Now each year cases involving investment advisers are one of the largest categories of cases brought by the Commission each year. The two cases discussed below – each recently filed – are examples of this trend.
SEC v. Goodman, Civil Action No. 21-cv-00365 (D. Minn. Filed Feb. 8, 2021) is an action which named as a defendant Isaiah Goodman. Becoming Financial, LLC, his firm, was a Minnesota registered investment adviser. Over a two-year period, beginning in the fall of 2018, the advisor informed clients that their funds would be invested in securities and mutual funds. The investments would be conservative. They would be made for the long term.
Over the period Mr. Goodman and his firm raised about $2.25 million from at least 20 advisory clients. Rather than invest the funds as promised, Defendant misappropriate significant portions of the capital raised. Portions were also used to make Ponzi like payments to certain investors. To conceal their wrongful conduct, Defendants furnished investors with false account statements. The complaint alleges violations of Securities Act Section 17(a) and Exchange Act Section 10(b). The case is pending. See Lit. Rel. No. 25026 (February 9, 2021).
SEC v. Moleski, Civil Action No. 2:21-cv-01065 (C.D. CA. Filed February 5, 2021) is an action which names as defendants: Stephen Scott Moleski, David Michael and Erik C. Jones. A series of entities controlled by various Defendants were named as relief defendants.
Over a two-year period, beginning in June 2018, the individual Defendants promoted and solicited investments in the private funds they controlled. In doing this, Defendants made a series of misrepresentations. Those included false claims that: Investor funds would be put into high grade investments; the investment objective was “phenomenal returns. . .;” a full time “licensed” broker would monitor the investments daily; investors would achieve financial freedom; and that “WE TREAT YOUR MONEY LIKE IT’S OUR OWN!”
Defendants also solicited individuals to purchase securities. Two securities offerings were made. Over the course of the offerings Defendants collectively charged the investor over $400,000 in commissions. Yet no Defendant was a registered broker-dealer; the securities were not registered. The complaint alleges violations of Securities Act Section 5(a), 5(c) and 17(a), Exchange Act Sections 10(b) and 15(a)(1) and Advisers Act Sections 206(1), 206(2), and 206(4). The case is pending. See Lit. Rel. No. 25025 (February 5, 2021).