A previously barred North Carolina investment advisor has been criminally charged with misappropriating $6.8 million by inducing at least 25 clients to invest portions of their IRAs into what turned out to be a Ponzi scheme.

David Schamens, 64, of Greensboro, N.C., was criminally charged with one count each of wire fraud, securities fraud and money laundering, the U.S. Attorney's Office for the Distict of New Jersey announcecd yesterday.

In a parallel action, he was also sued by the Securites and Exchange Commission, which barred him from the securities industry in 1992 for seperate offenses.

Schamens was described by the SEC in its lawsuit as an advisor who, “rather than investing his client’s funds, directed them into his own pocket."

Schamens was barred from the industry in 1992, when the SEC charged Schamens for misappropriating investor funds, among other violations. As part of the settled charges, he was barred from association with any broker, dealer, municipal securities dealer, investment advisor or investment company.

The criminal complaint alleges that starting in 2014, "Schamens fraudulently solicited investments in various entities he controlled, including TD Trading LLC, TFG Trading LLC, TradeStream Analytics LTD, Tradedesk Financial Group Inc. and others, under the promise of annual rates of return of 12 percent to 30 percent." All the firms were based in Secaucus, N.J.

Starting in February 2019, the criminal charges state, Schamens began soliciting funds for the TradeStream Algo Fund LP, also of Secaucus, which he told investors was an algorithm-based trading pool he had developed.

"In each instance, Schamens directed investors to wire funds directly or to transfer portions of their Individual Retirement Accounts (IRAs) to bank accounts he controlled," the U.S. Attorney's Office said.

But Schamens never invested any of the funds he solicited, the SEC said in the suit. “Instead, [he] used most of the investors’ money to pay personal expenses or to make Ponzi-like payments to earlier investors seeking to exit the fund.”

The U.S. Attorneys Office said Schamens misapproriated at least $6.8 million from at least 25 clients. The SEC complaint said the total amount stolen amounted to about $1.8 million. The discrepency in figures couldn't be clarified at press time.

Schamens also allegedly concealed the fraudulent nature of the Algo Fund by providing investors with fake account statements that showed 80% returns and large profits. He also provided them with a fake letter from an auditing firm vouching for the transactions and balances in the fund, the SEC lawsuit alleges.

Schamens even caused “tax forms to be prepared and issued to some investors each year, showing each investor’s purported gain on their investment. The monthly statements and tax forms were false. Because there were no investments in the account, there were no investment gains in any of the investor accounts,” the SEC said.

At the time he began soliciting investors for the TradeStream fund, Schamens was teaching investment seminars through an entity called TradeStream University (TSU), the SEC said.

The TSU students were among the prospective investors targeted by Schamens, the SEC said. He also solicited investors who he had induced to invest in other funds to move their money to the Algo Fund, the regulator said.

He allegedly used the funds to pay for personal expenses such as his mortgage, cars, attorney payments, retail spending, and political contributions. He also used $100,000 of these funds to pay his personal attorneys and $430,000 to settle arbitration claims against him, the SEC said.

"This is not the first time that David Schamens has been charged by the SEC for misconduct and serves as a good reminder for investors to research potential advisers," said Richard R. Best, director of the SEC’s New York Regional Office. "Before entrusting someone with managing your money, investors should visit Investor.gov where they can vet potential advisers."

The count of wire fraud carries a maximum potential penalty of 20 years in prison and a fine of $250,000. The count of securities fraud carries a maximum potential penalty of 25 years in prison and a fine of $1 million, the U.S. Attorney's Office said. The count of money laundering carries a maximum potential penalty of 20 years in prison and a fine of $500,000.