The Securities and Exchange Commission has obtained a final judgment against a California investment advisor who was ordered to pay $3.3 million in restitution to clients he defrauded, the SEC announced.
Steven Fitzgerald Brown of Marina del Rey, Calif., was sentenced in June to 52 months in prison and three years’ probation after he pleaded guilty to criminal wire fraud charges filed by the U.S. Attorney’s Office for the Central District of California. The judgment in the SEC civil case was issued by U.S. District Court for the Central District of California.
Among the victims of the fraud was a non-profit organization that provided dance and theater arts education to children and young adults in Los Angeles. Brown had access to the organization’s bank accounts because he was employed as the accountant for the organization, which was not named in the plea agreement. Included in the restitution was $700,000 he embezzled from the organization, prosecutors said.
The remainder of the $3.3 million in restitution will go to about 10 victims of a Ponzi scheme Brown ran between 2014 and 2018, the SEC said. The scheme was carried out through Alpha Trade Analytics, a financial consulting and investment company that Brown owned.
To encourage people and the arts organization to invest with Alpha Trade Analytics, Brown falsely promised that their investments would only be used for foreign exchange currency trading and that they would receive guaranteed monthly payouts of about 10%. He also falsely represented that he had extensive experience in foreign exchange investing, regularly made profitable trades, and achieved substantial and growing rates of return that exceeded the industry average, the U.S. Attorney’s Office said.
Brown solicited investments in Alpha Trade Analytics from people he met through his position with the arts organization, which afforded him access to high-net-worth individuals, the U.S. Attorney said.
Contrary to what he told investors, Brown only used a small portion of the total amount invested in Alpha Trade Analytics for foreign exchange trading. Instead, he routinely used investor funds for other purposes, including his rent, car payments, restaurant and retail expenses, and to pay some investors, according to the plea agreement.
In order to induce investors to maintain or supplement their investments with his company and to conceal his scheme, Brown periodically provided investors with account statements that reflected fabricated investment returns that often showed steady, significant gains, the agreement said.
Brown admitted he made some of the promised recurring payouts and provided demanded refunds, not based on any foreign exchange investment returns, but instead from money stolen from new investors and through funds he embezzled from the dance academy through unauthorized wire transfers, credit card advances, and cash withdrawals, the U.S. Attorney said.