SEC Shuts Down Fraudulent Investment Advisor Who Was Targeting the Israeli-American Community
The SE announced on April 1, 2019 that it had halted an ongoing investment fraud by Investment Advisor Motty Mizrahi targeting members of the Jewish community, primarily in the Los Angeles, California region.
The SEC filed an emergency action in federal court against Motty Mizrahi and MBIG Company, his sole proprietorship, alleging that, since June 2012, they defrauded at least 15 advisory clients out of more than $3 million. According to the SEC’s complaint, unsealed on March 29, 2019, Motty Mizrahi falsely claimed that MBIG used sophisticated trading strategies to generate “guaranteed” returns of between 2-3% per month, the investments were risk-free, and clients would not lose their money and could withdraw their funds at any time. Unbeknownst to his clients, however, MBIG had no bank or brokerage account of its own – rather, clients unwittingly sent money to Motty Mizrahi’s personal bank account. Motty Mizrahi used the money to fund his personal brokerage account, in which he engaged in high-risk options trading producing losses of more than $2.2 million, and to pay personal expenses. The SEC alleges that Motty Mizrahi covered up his fraud by issuing MBIG’s clients fabricated account statements, showing positive account balances and profits from trading. When clients demanded proof of MBIG’s securities holdings, Motty Mizrahi showed them brokerage statements reflecting a multi-million dollar balance for a fictitious MBIG brokerage account.
On March 27, 2019 the U.S. District Court for the Central District of California granted emergency relief, including a temporary restraining order against the defendants and an order freezing their assets.
In a parallel action, the United States Attorney’s Office for the Central District of California announced on March 29, 2019 it filed wire fraud charges against Motty Mizrahi and another individual.
The SEC’s complaint charges the defendants with violating the antifraud provisions of Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder and Sections 206(1) and (2) of the Investment Advisors Act of 1940.
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