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SEC Charges Broker with Defrauding Retail Investors

(HedgeCo.Net) The Securities and Exchange Commission has charged Edward E. Matthes, a former Wisconsin-based registered representative and investment adviser, with defrauding 26 of his mostly elderly retail brokerage customers and investment advisory clients out of approximately $2.4 million. Matthes has agreed to settle the SEC’s charges, with monetary relief to be determined by the court at a later date.

According to the SEC’s complaint, Matthes convinced his brokerage customers and advisory clients to invest in what he described as a safe investment that would earn a guaranteed minimum yield of 4% per year. As alleged in the complaint, the purported investment did not exist, and Matthes stole approximately $1.4 million for his personal use. Matthes allegedly stole an additional $1 million by making unauthorized sales and withdrawals from his customers’ variable annuities. To cover up his fraud, Matthes allegedly created fake account statements and paid approximately $170,000 in Ponzi-like payments.

The SEC’s complaint, filed in federal district court in the Eastern District of Wisconsin, charges Matthes with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Without admitting or denying the allegations in the complaint, Matthes consented to the entry of a judgment that permanently enjoins him from violating the charged provisions and orders him to pay disgorgement, prejudgment interest, and penalties in amounts to be determined by the court at a later date. The settlement is subject to court approval.

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