SEC charges broker with fraudulently raising $3.2 million for his failing mutual funds

The Securities and Exchange Commission has issued an emergency asset freeze against a former stockbroker for defrauding investors in his failing mutual fund business.

Peter Kohli, of Pottstown, Pa., fraudulently raised more than $3.2 million from at least 120 investors from 2012 through last year, the SEC said Wednesday. Mr. Kohli was then acting as president and chief executive officer of dually-registered broker-dealer and investment adviser, DMS Advisors, according to its complaint.

In 2012 Mr. Kohli started the DMS Funds series, which consisted of four emerging-market mutual funds. He allegedly overstated their sophistication while ignoring the risk that he and his firm would not be able to pay its expenses. As the funds neared collapse, he stole money from investors, according to the SEC’s complaint.

“As the funds floundered due to Kohli’s extreme recklessness, Kohli engaged in three additional frauds in an effort to keep the funds afloat,” the SEC said in its complaint.

As part of the rescue effort, he misappropriated money solicited to invest in one of the funds, while attracting two types of investments in the holding company for DMS Advisors, Marshad Capital Group, according to the allegations made by the regulator.

Mr. Kohli sold Marshad promissory notes in a “desperate attempt to raise money to cover fund expenses and to delay the inevitable,” according to the SEC’s complaint. He also sold warrants in the holding company, which he controlled, falsely telling investors that Marshad had taken steps toward an initial public offering, the SEC alleged.

Mr. Kohli didn’t immediately return a phone call seeking comment on the SEC’s charges.

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