A Texas-based investment advisor has been charged by the SEC with allegedly investing $3.7 million of its mostly elderly clients’ assets in fraudulent securities.

The U.S. Securities and Exchange Commission today filed civil charges against Knight Nguyen Investments of Katy, Texas; its majority owner, Chris Lopez; his brother, Jayson Lopez; and a representative, Forest Jones, in connection with the scheme in the U.S. District Court for the Southern District of Texas in Houston.

In its complaint, the SEC alleged that Knight Nguyen Investments, Chris Lopez and Jones claimed to be established advisors with expertise in low-risk alternatives, promising older and unsophisticated investors that they would only invest in “proven” companies. Instead, client funds were allocated to high-risk securities that did not meet the stated investment criteria, the complaint said.

According to the SEC, Chris Lopez had no experience as a securities professional before founding the firm and Knight Nguyen had “little or no experience” in sourcing alternative investments.

Furthermore, most of the companies Knight Nguyen invested in on behalf of its clients were owned by or associated with Chris Lopez and/or his brother, Jayson Lopez, the SEC said. Jayson Lopez allegedly abetted the fraud by misusing investor funds and helping to fabricate false financial statements and other documents.

Between March 2016 and September 2018, Knight Nguyen, Chris Lopez and Jones raised at least $3.7 million from approximately 70 clients, according to the SEC.

Knight Nguyen allegedly also falsely represented its assets under management on its Forms ADV, failed to disclose conflicts of interest and failed to draft and implement policies and procedures to keep books and records, in addition to repeatedly violating the custody rules.

The SEC is seeking injunctions to prevent further violations, civil penalties, disgorgement and other penalties at the court’s discretion.