Former Registered Rep Charged Over Alleged $3.9 Million Fraud
The SEC has charged a former registered representative and investment advisor in Pennsylvania with running a $3.9 million Ponzi-like scheme, according to a press release from the regulator.
To raise the money, Douglas Simanski allegedly convinced around 27 of his brokerage and investment advisory clients that he would invest the funds in a “tax free” fixed rate product, a rental car company or one of two coal mining firms where he claimed he had ownership, the SEC says.
He allegedly steered investors to send him checks payable to bank and brokerage accounts he opened in his wife’s name, and then used the funds to repay other investors and for his own personal expenses, according to the press release. Simanski’s scheme ended after one of his clients got in touch with Finra, after which Simanski admitted the fraud to his employer, the SEC says.
Simanski had been in the securities industry since 1995 and was registered with Next Financial Group from 1999 to 2016, according to his BrokerCheck profile.
The firm discharged him in May 2016 after allegations he “sold fictitious investments and converted the funds for his own personal use and benefit,” according to BrokerCheck.
A month later, Finra barred Simanski for failing to provide requested information related to allegations of the conversion of funds, according to the industry’s self-regulator.
The former broker had no claims prior to getting discharged from Next Financial, but more than 20 customer disputes after it, with most of them getting settled and two being denied, according to BrokerCheck.
Simanski has agreed to settle with the SEC, subject to court approval, the regulator says.
The SEC also ordered injunctive relief and disgorgement of ill-gotten gains, according to the press release. In addition, Simanski has agreed to the SEC entering an order barring him from the securities industry, the regulatory agency says.
Simanski has also pleaded guilty to criminal charges in a parallel action, according to the U.S. Attorney’s Office for the Western District of Pennsylvania, the SEC says.
Editor’s Note: This article has been updated to correct the name of the former registered representative and investment advisor into Douglas Simanski. An earlier version incorrectly identified the individual as David Simanski.