The Securities and Exchange Commission today charged an Armonk, N.Y. investment advisor with stealing more than $6 million in client funds for personal use. As part of the scheme, the agency alleges that Matthew D. Weitzman defrauded terminally ill and mentally impaired clients.
Weitzman is identified in the SEC's complaint as co-founder and a principal of AFW Wealth Advisors, the business name for AFW Asset Management Inc., a registered investment advisor with offices in Purchase, N.Y. and Natick, Mass. Weitzman also served as AFW's compliance officer.
In a complaint filed in the U.S. District Court for the Southern District of New York, the SEC charges that Weitzman sold securities in clients' brokerage accounts and illegally funneled their money to a bank account that he secretly controlled. While he spent the money on a multi-million dollar home, cars and other luxury items, he provided false account statements to clients often showing inflated account balances and securities holdings.
Weitzman also submitted to a broker-dealer phony letters from clients that purported to authorize the money transfers. When clients questioned Weitzman about the transfers they did not authorize, he misrepresented that he was withdrawing their funds to make legitimate investments.
According to the SEC's complaint, Weitzman in some instances misappropriated funds from AFW clients who were unlikely to scrutinize their account statements. For example, Weitzman misappropriated roughly $430,000 in a series of unauthorized transfers from a client who was terminally ill. Weitzman later misappropriated $85,000 in two separate unauthorized transfers from the account of the client's widow.
The SEC also alleges that Weitzman targeted an elderly couple with compromised mental capacities, misappropriating approximately $400,000 of their money.
The complaint seeks a permanent injunction against violating federal securities laws (i.e. one more strike and he's held in contempt of court and could be thrown in jail) and the return of ill-gotten gains, plus prejudgment interest, financial penalties, an asset freeze, a sworn accounting, and an order prohibiting the destruction of documents. In addition, the complaint seeks to require that Weitzman notify the SEC--and obtain approval of the court--before he files for bankruptcy protection.
Weitzman agreed to settle the SEC's claims without admitting or denying the allegations, and consented to the entry of a judgment that will grant the SEC the full relief that it seeks, but will defer the determination of the financial amounts of the settlement until a later date. The agreement to resolve the SEC's action is subject to court approval.
Separately, the U.S. Attorney's Office for the Southern District of New York on Wednesday announced criminal charges against Weitzman based on the same misconduct alleged in the SEC's complaint.