Barred permanently by the Financial Industry Regulatory Authority in 2022, ex-broker John Nicholas Matson of San Diego now faces a lawsuit from the Securities and Exchange Commission alleging that he ran a Ponzi scheme in which he transferred more than $1.5 million from clients to his personal accounts while he was working at LPL and Ameriprise.

According to the SEC complaint, filed yesterday in the U.S. District Court for the Southern District of California, 67-year-old Matson allegedly raised $1.56 million from five clients at the two dually registered firms between January 2012 and September 2021.

The SEC charges include three counts of fraud, and the agency is requesting a jury trial along with the disgorgement of ill-gotten gains, prejudgment interest, and the payment of civil penalties.

As of the time this article was filed, no attorney representing Matson had registered with the court, and Matson could not be reached for comment.

According to the complaint, Matson allegedly operated by soliciting his brokerage clients for investment in his own company, South Bay Acquisitions, which he founded with his wife in order to invest in private companies, real estate and lending.

“The securities, which were denoted ‘LLC Bonds’ and were functionally promissory notes, included language stating that [Matson and South Bay] would manage the proceeds as fiduciaries and promising 12% to 20% interest,” the lawsuit stated.

Instead, Matson allegedly diverted the funds to his personal accounts, using some of the money to pay back the monthly interest payments. But $950,000 allegedly went to pay personal expenses, the complaint said.

South Bay conducted no business other than making a single investment in April 2012, when the company invested $100,000 in a private company in exchange for 50,000 shares, the lawsuit said. In May 2018, South Bay sold 10,000 shares for $250,000, and then in April 2020 sold 20,000 shares for $400,000. The company still holds 20,000 shares, according to the complaint.

Beginning in 2016, when South Bay was close to defaulting on its required periodic payments to the five investors, Matson allegedly made deposits into the company totaling $1.468 million—about $98,000 less than what he had received from his clients, the lawsuit said.

The sources of those repayments were personal loans from family, financing, and Matson’s own retirement assets, the complaint said.

“As of May 2023, one investor has not received payments equal to her principal investment and another’s second investment remains underpaid. These investors have been harmed by losing approximately $280,000 in principal,” the complaint said. “No investor has received a return of their principal and the interest they were promised.”