SEC: Florida Investor Lost $9.5 Million in $100 Million Investment Fraud Scheme
On August 27th, 2019, the Securities and Exchange Commission (SEC) announced investment fraud charges against Brenda Smith and her fund Broad Reach Capital, LP. Among other things, the SEC’s complaint alleges that Ms. Smith — who took in more than $105 million from investors — was doing little more than operating a Ponzi scheme.
The Allegations: Few Legitimate Investments, Money Was Shuffled Around
Promises of High Returns Through Advanced Investment Strategies
In total, the SEC contends that Brenda Smith took in approximately $105 million in funds from at least forty different investors. She enticed investors through representations that her companies would be investing client money into publicly available securities, using a set of complex and proprietary investment strategies that she promised would generate above-market rates of return.
A Florida Investor Put $9.5 Million Into Broad Reach Capital
The SEC’s complaint profiles three different investors, including an anonymous Florida investor who is identified solely at ‘Investor 1’. According to the federal regulator, ‘Investor 1’ put around $9.5 million into the control of Brenda Smith. Indeed, the SEC noted that he was the single largest investor in Broad Reach Capital, LP. The Florida investor was provided written documentation stating that his money would be investing in accordance with the proprietary trading strategies developed by Ms. Smith.
The SEC Believes that Brenda Smith Was Operating a Ponzi Scheme
The SEC contends that Brenda Smith was making relatively few legitimate investments. Instead, most of the investor money was simply being shuffled around between her companies, used to pay off older investors and siphoned off for personal use. As an example, of the $9.5 million put into the fund by the Florida investors, the SEC alleges that only $550,000 ever made it into the proper trading accounts. The remaining $8.7 million was diverted into other entities controlled by Ms. Smith and used for improper purposes.
Legal Action and Proposed Sanctions
Federal regulators have already obtained an emergency asset freeze against Brenda Smith and three of her investment companies. In addition, the agency is seeking all appropriate legal remedies. Specifically, this includes disgorgement of any ill-gotten gains, payment of full financial restitution, and further monetary penalties. It is worth mentioning that Brenda Smith has also been arrested. She is facing criminal fraud charges from the United States Department of Justice (DOJ).
Get Help From Our Miami, FL Securities Fraud Lawyer Today
At Carlson & Associates, P.A., our Miami Ponzi scheme attorneys know how to hold financial advisors and broker-dealers accountable. Our law firm is proud to fight for the legal rights of investors. We have the skills, experience, and legal training needed to handle Ponzi scheme cases. To arrange a completely confidential review of your securities fraud claim, please call us at our Miami law office right away.
Resource:
sec.gov/litigation/complaints/2019/comp-pr2019-162.pdf