A former Connecticut investment advisor and broker-dealer bilked multiple clients out of $1.6 million by misappropriating funds he persuaded them to transfer directly to his personal bank account for investing, according to the Securities and Exchange Commission.
In a parallel case, the U.S. District Attorney’s Office for the Southern District of New York announced criminal charges against the advisor, Elias Herbert Hafen.
Hafen, 64, of New Canaan, pleaded guilty on one count of wire fraud and will face up to five years in prison, U.S. Attorney Geoffrey Berman announced on Wednesday, when Hafen appeared in Manhattan federal court.
The SEC’s complaint said that from 2011 through 2018, Hafen, while employed as a New York City-based registered representative and investment advisor at large financial institutions, namely Wells Fargo and Morgan Stanley, engaged in a scheme in which he convinced his retail clients that he had access to a purported investment opportunity outside the financial institution where he worked.
The complaint said he told clients that the supposed investment would pay an annual 6% return and had little risk. He advised them to take their money out of the financial institutions—by liquidating stock holdings and personal retirement accounts—and deposit that money into their personal bank accounts, then transfer or wire the money to Hafen’s personal bank account.
He then pocketed the money and used it for his own personal use by paying house, car and credit card expenses for himself and family members, among other things, the complaint said.
The SEC also noted that while some of the victims received a portion or all of their money back, most of the money was never repaid. Hafen, the complaint said, took more than $1.6 million from 11 victims over the seven-year period. Of the total $1.6 million, Hafen has returned approximately $650,000, according to the SEC.
“The defendant exploited his fiduciary relationship with these advisory clients and engaged in deceptive conduct in order to obscure his theft,” the complaint said.
The SEC complaint seeks a permanent injunction, disgorgement plus prejudgment interest and civil penalties against Hafen.