A former Washington-area financial advisor and radio host allegedly used proceeds from a $20 million Ponzi scheme to buy jewelry, luxury clothing and a suite to watch the NFL’s Dallas Cowboys at AT&T Stadium.
The U.S. Securities and Exchange Commission brought civil fraud charges on Monday against Dawn J. Bennett, 55, formerly the principal of Bennett Group Financial Services, in U.S. District Court for the District of Maryland.
Bennett was once the host of “Financial Myth Busting with Dawn Bennett,” a syndicated radio show, and in the past regularly contributed commentary to CNBC, Financial Advisor magazine's web site, among many other sources serving the financial services industry. She was barred from the financial services industry in July 2016 for allegedly exaggerating the amount of client assets she and her firm filed.
According to the SEC’s complaint, Bennett defrauded investors in offering notes of DJBennett, a Washington, D.C.-based retail sports apparel business she founded and owned. From December 2014 through at least July 2017, Bennett offered investors promissory notes in DJBennett by allegedly making false and misleading statements.
The SEC claims that DJBennett was unprofitable, and that by the outset of the fraud Bennett had lost a significant portion of her financial advisory clientele and had accumulated a number of financial obligations, but nevertheless continued to live an “extravagant” lifestyle.
By December 2014, DJBennett’s annual revenue had declined to $400,000, and its liabilities had grown to $15.6 million.
To finance DJBennett, Bennett allegedly targeted elderly and financially unsophisticated investors by misrepresenting the company’s profitability and by claiming that the company had the resources to pay annual rates of return up to 15 percent.
Bennett also allegedly misled investors about DJBennett’s liabilities and the risk associated with their investments.
According to the SEC’s complaint, Bennett told investors that the funds would be used for “corporate” purposes, when she actually used the proceeds to pay earlier investors, to service debt and to purchase luxuries including high-end clothing, jewelry, “mystics,” and $500,000 in annual lease for a luxury suite at AT&T Stadium in Dallas.
The SEC Alleges that Bennett lied to her broker dealer and a regulator about the ongoing note sales, fraudulently obtained loans by submitting fabricated brokerage statements to inflate her net worth, then used the proceeds to make interest and redemption payments.
In its current action, the SEC is seeking the payment of civil penalties, disgorgement and pre-judgment interest.
In Summer 2015, the SEC filed civil charges and opened an administrative proceeding against Bennett alleging that she exaggerated Bennett Group Financial Services’ assets under management and investment returns on her radio program. According to the SEC’s complaint in that action, Bennett allegedly inflated her AUM by at least $1.5 billion and claimed that her firm’s investment returns placed them within the top 1 percent of firms worldwide without disclosing that the returns were those of a model portfolio.
Bennett sued the SEC in October 2015 arguing that the process it used to appoint administrative judges was unconstitutional. In December of that year, a federal court upheld the SEC’s administrative process, allowing the action to proceed. She continued to deny the allegations and did not appear in a January 2016 administrative proceeding in her case.
In July 2016, an SEC administrative law judge ruled Bennett and her firm guilty by default because they did not participate in the proceeding, writing that Bennett’s “obstructive behavior” was an indication of wrongdoing. That decision ordered the defendants to pay more than $4 million in fees and penalties and instituted an industry bar.