(HedgeCo.Net) The Securities and Exchange Commission has charged a Los Angeles man for his role in a fraudulent scheme to gain undisclosed control over two registered investment advisers so that he, his partner, and their associates could steal $43 million of client funds they purported to invest in Native American tribal bonds.

The SEC alleges that Jason Sugarman, formerly associated with a registered broker-dealer and investment adviser, directed the scheme along with Jason Galanis, whom the SEC has previously charged with securities fraud. According to the SEC’s complaint, Sugarman secured financing to acquire control of investment advisers so that he and his associates could use client funds to purchase Native American tribal bonds. The SEC further alleges that Sugarman and his associates gained control over the disposition of the bond sale proceeds, and that although the proceeds were supposed to be invested in annuities to benefit the tribal corporation and repay the bondholders, Sugarman and his associates instead misappropriated the proceeds for their own benefit.

The Commission has previously charged Galanis and seven other individuals for their roles in the tribal bonds scheme. Galanis, who pleaded guilty to parallel criminal charges arising from his role in the tribal bonds scheme, is currently incarcerated.

“These charges reflect that orchestrating a scheme from behind the scenes does not insulate someone from liability,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York office. “As alleged in the complaint, Sugarman played a crucial role in obtaining control of advisory client funds so they could siphon off those funds for their own personal benefit.”

The SEC’s complaint charges Sugarman with violating or aiding and abetting violations of the antifraud provisions of the federal securities laws and related rules. The complaint seeks monetary and equitable relief against Sugarman.