The U.S. Securities and Exchange Commission has filed a complaint against a Florida broker that alleges he misappropriated $3 million from 20 customers of his broker-dealer and spent hundreds of thousands of dollars of client money on boats, luxury condos and other personal luxuries.
The agency filed a civil complaint today in the U.S. District Court for the Middle District of Florida, Ocala Division, against broker Joseph Michael Todd and his companies, Todd Financial Services and TFS Insurance Services, claiming that he obtained investor funds through deceptive practices and had customers of his broker-dealer Centaurus Financial write checks to these companies, falsely telling the customers the moneys would be invested in various securities.
“Instead, Todd commingled investors’ funds and kept the money for his own personal use, spending it on lavish real estate, boating, hunting, casinos and adult entertainment,” said the complaint. “Todd perpetuated the fraud by making material misrepresentations to customers regarding the use of their funds in meetings that took place in person, in phone conversations, and in documents that he prepared and provided to customers.”
The agency said most of these clients were senior citizens, retirees or individuals with disabilities.
Todd is a 59-year-old resident of Panama City, Fla., and first got his securities license in 1988, according to the SEC. The agency claims his misappropriation of client money went on from August 2016 through November 2022. While the agency didn’t name the brokerage he worked for, the BrokerCheck website lists it as Centaurus, based in Anaheim, Calif. Centaurus disclosed on the site that it let Todd go in November 2022 amid an investigation. He was suspended by the Financial Industry Regulatory Authority in April of this year for failing to comply with an arbitration award. In February, a Finra arbitration panel told him to pay close to $100,000 to a couple of clients who had accused him of selling away, negligent account management and sale of unregistered securities, among other things.
The SEC said that Todd told customers their funds would go toward specific stocks. In one case, he said their money would go into a fund that invested in collateralized debt obligations, but the SEC claims Todd spent the money for personal things and did not buy the securities, according to the complaint.
“In some cases, Todd, through TFS, offered customers the opportunity to invest in fictional investments, such as the ‘CRTFS Mortgage Fund.’ In reality, no such investment fund existed and Todd spent the funds for personal use,” the SEC claimed. As part of his fraud, the agency said he fabricated investment projections and account statements, promising some customers a minimum 5% return.
Meanwhile, the agency said that since 2019, Todd “spent more than $450,000 on boats, more than $230,000 on a luxury condominium in Mexico Beach, Fla., more than $65,600 on hunting and hunting equipment, more than $275,000 on tractors and farm equipment, more than $11,000 at casinos and adult entertainment venues. Todd also wrote $568,000 in checks to himself.”
Todd is also subject to six other pending customer disputes, three of them claiming six-figure damages, according to BrokerCheck. The largest is for $238,000. All of the customers make some combination of similar claims, saying that Todd either engaged in unauthorized trading in high-risk and unsuitable investments or otherwise misappropriated funds.
The phone for Todd’s firm is no longer working. However, he said this in response to the arbitration case he lost:
“The investments made through my broker/dealer were suitable and were recommended based on the customer's objectives, goals and financial circumstances and were offered only after their review of all material documentation related to the investment. The customers confirmed in writing that they not only received the requisite investment documentation/disclosures, but that they fully understood the characteristics and risks of the investments. At all times, I put the customer's interest first and I will vigorously defend this matter to the fullest extent of the law.”
Before he was with Centaurus, Todd was with Investors Capital Corp. from 2007 to 2016 and was previously with Edward Jones for five years.
The SEC said that on January 23 of this year, Todd filed an assignment for benefit of creditors action to liquidate and distribute assets to creditors. The SEC is seeking to enjoin Todd and his entities from participating in the issuance of securities, among other activities, as well as seeking disgorgement of ill-gotten gains.