(HedgeCo.Net) A federal grand jury in Los Angeles has indicted investment adviser Motty Mizrahi on wire fraud charges, in a seven count indictment.The SEC previously charged Mizrahi and his sole proprietorship MBIG Company in an emergency action where it obtained a temporary restraining order and subsequently a preliminary injunction against Mizrahi and MBIG, for perpetrating a fraud on their investment advisory clients.
According to the indictment, Mizrahi and another individual engaged in a scheme to defraud more than forty investors, as well as Mizrahi’s employer, a private high school. Holding himself out as a licensed professional money manager, broker and certified public accountant, Mizrahi claimed that he employed sophisticated “risk-free” trading strategies with “guaranteed returns”; that investors’ principal could be redeemed “on demand”; and that Mizrahi would be compensated only by sharing 25% of investors’ profits. Instead, according to the indictment, Mizrahi transferred millions of investor monies to his personal trading accounts, where he accumulated persistent, extensive losses; he converted investor monies to personal use; and he converted certain of the monies deployed in his investment scheme from his employer. Further according to the indictment, Mizrahi lulled investors by providing them false account statements that showed illusory gains; by showing them fraudulently-altered fictitious brokerage statements purporting to show millions in reserves; and by falsely assuring them that their funds were safely invested.
The criminal case against Mizrahi is based on much of the same conduct alleged in the SEC’s complaint, unsealed on March 29, 2019, which charged Mizrahi and MBIG with violations of 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. The SEC’s complaint charges Mizrahi and MBIG with fraudulently misleading advisory clients through the same misrepresentations regarding his background, trading strategies, compensation that are charged in the indictment, and with lulling investors through fictitious brokerage records and false account statements designed to conceal his fraud. The recent indictment superseded a complaint for criminal wire fraud charges announced on March 29, 2019 by the United States Attorney’s Office for the Central District of California.