A New Jersey financial advisor faces up to 20 years in prison and has been barred from the industry after admitting to spending $3.1 million of his elderly clients’ assets on personal luxuries and gambling.
Scott Newsholme, 42, of Farmingdale, N.J., pleaded guilty last week to fraud, aggravated identity theft and aiding the preparation of false tax returns in U.S. District Court in Trenton, N.J.
In response to the guilty plea, an administrative judge in a U.S. Securities and Exchange Commission civil proceeding barred Newsholme from associating with any broker, dealer, advisor or statistical rating organization, and barred him from participating in the issuance of any security.
Newsholme, formerly the proprietor of MVP Financial in Howell, N.J., allegedly misappropriated more than $3 million from his clients’ accounts.
According to a statement from the U.S. District Attorney’s office, New Jersey District, between 2007 and 2017, Newsholme told clients if they invested with him, he would use their assets to invest in various securities, including bond instruments issued by a New Jersey country club, a bond investment in a video game production company and investments in the production of a movie, as well as mutual funds, annuities, life insurance policies, educational accounts, money market funds and an escrow account for the purchase of a house.
The SEC claims that, to conceal his scheme, Newsholme falsely told clients that their investments were faring well, backing up the claim with fabricated account statements, doctored stock certificates and phony promissory notes purporting to be bonds and other debt instruments. All the while, the ex-advisor had cashed his clients’ checks at a check cashing store and pocketed their money, the SEC said.
According to the federal prosecutors, Newsholme used their funds for personal expenses, including the purchase of multiple vehicles, bedroom furniture, debits at casinos, ATM withdrawals and bank transfers to his personal accounts. Newsholme also diverted funds from incoming investments to pay clients requesting to withdraw funds from their portfolios.
Newsholme allegedly misappropriated more than $3.1 million from his clients, resulting in net investment losses of more than $1.8 million.
Newsholme was formerly a registered representative with two broker-dealers until 2014, when Finra barred him from its member firms for failing to respond to requests for information, according to the SEC.
The SEC also notes that in 2015 Newsholme consented to a state Bureau of Securities order finding that he made untrue statements and engaged in dishonest or ethical practices related to the securities industry.