Connecticut Investment Adviser Charged with Defrauding Retail Investors

(HedgeCo.Net) The Securities and Exchange Commission charged a Connecticut investment adviser with misappropriating $560,000 from his advisory clients by selling fictitious financial products and using the proceeds to pay other advisory clients, as well as for his own use.

According to the SEC’s complaint, filed in federal court in Connecticut, Lester W. Burroughs engaged in a scheme to defraud retail investors by misappropriating funds from one advisory client and then making Ponzi-like payments to the client using assets misappropriated from other advisory clients. Burroughs allegedly told certain advisory clients that he would invest their money in “Guaranteed Interest Contracts” (GIC) with guaranteed annual returns of 4% or 7%. The complaint alleges that Burroughs never invested his clients’ money in GICs and that he instead misappropriated the funds and provided clients with fake account statements to hide his theft.

In a parallel action, the U.S. Attorney’s Office for the District of Connecticut announced criminal charges against Burroughs.

The SEC’s complaint charges Burroughs with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and seeks a permanent injunction from future violations of those provisions, disgorgement and prejudgment interest, and a civil monetary penalty.

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