SEC Charges Former Stockbroker with Conducting Ponzi Scheme
On July 1, 2015, the Securities and Exchange Commission (SEC) charged a former stockbroker in Pennsylvania with conducting a Ponzi scheme and stealing investor money to purchase a condominium in Florida, funding his own vacations and other personal expenses.
The SEC alleges that Malcolm Segal fraudulently sold so-called certificates of deposits (CDs) to his brokerage customers by falsely claiming that he could get them higher interest rates of return on FDIC-insured CDs, than what is otherwise available to the general public. In some instances, Segal purchased CDs on behalf of investors but secretly redeemed them early and took the proceeds. In other incidences, Segal did not purchase CDs at all despite telling customers he had. He raised approximately $15.5 million from at least 50 investors. Besides spending investor money on himself, Segal used it in Ponzi scheme fashion for purported interest payments and principal repayments to earlier investors.
The SEC charges also allege that Segal took funds directly from his customers’ brokerage accounts in a last-ditch effort to keep funding the Ponzi scheme payments. He forged letters of authorization to facilitate the transfer of customer funds to accounts he controlled, notably forging the signature of one customer’s wife who had died before the date of the transfer. The scheme collapsed in July 2014.
In a parallel action, the U.S. Attorney’s Office for the Eastern District of Pennsylvania brought criminal charges against Malcolm Segal.
The SEC’s complaint filed in federal court in Philadelphia charges Malcolm Segal with violations of Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC seeks disgorgement plus prejudgment interest and penalties as well as a permanent injunction.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real South, Suite 202 N, Boca Raton, Florida, (561) 416-8956, or info@securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group, P.A. and should not be construed as, and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
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