45 years after the Securities and Exchange Commission barred Thomas D. Conrad Jr. from the industry, the SEC has filed hedge fund fraud charges against the 85-year-old Georgia man and his 55-year –old son. According to the regulator, Thomas and Stuart P. Conrad bilked investors in a $10.7M hedge fund in which the older Conrad was the primary supervisory. Also facing SEC charges are the Conrads’ unregistered advisory firms: Financial Management Corporation S.R.L. and Financial Management Corporation.
In its complaint, the SEC said that Thomas generally suspended investor payouts for over four years even though he kept issuing payouts to his son, himself, other relatives, and certain investors. The payouts included $2.3M in redemptions and monies to his wife and himself between ’10 and ’14, as well as approximately $444K to his son.
The Commission said that Thomas violated federal securities law when he didn’t tell investors that he had been barred from the industry over a disciplinary matter in 1971. Offering documents, however, spoke about Thomas’s extensive securities industry experience.
The hedge fund got into financial trouble when they became involved in Valhalla Investment Partners, which proved to be a Ponzi scam. Thomas’s fund had to pay back $2.3M of bogus profits earned.
The regulator accused Thomas of acting improperly when he failed to disclose that the hedge fund had paid him fees for serving as the sub-manager of certain investments. The SEC claims that Stuart aided and abetted the violations allegedly committed by his father.
The Commission wants civil penalties, permanent injunctions, disgorgement, plus prejudgment interest.
Securities Fraud
It is unfortunate that there are some financial advisers who are able to continuing bilking investors even after being fined, sanction, or, in some instances, expelled from the securities industry. At Shepherd Smith Edwards and Kantas, LTD LLP, please contact our hedge fund fraud law firm today. We have helped thousands of investors recoup their losses.
SEC Charges Father and Son and Their Investment Advisory Firms with Defrauding Hedge Fund Investors, SEC, July 18, 2016