On Advice

Dawn Bennett's alleged Ponzi a sign of dark times

Is Ms. Bennett's alleged scheme a harbinger of other such frauds?

Sep 7, 2017 @ 11:16 am

By Bruce Kelly

Dawn Bennett
+ Zoom
Dawn Bennett

"Double, double, toil and trouble, fire burn and cauldron bubble," are lines recited famously by the Three Witches in Shakespeare's "Macbeth," but notorious financial adviser Dawn Bennett has allegedly been calling on similar dark forces to silence attorneys from the Securities and Exchange Commission who were investigating her.

Ms. Bennett's voodoo spells apparently failed to do the trick. Last month, the Securities and Exchange Commission charged her with running a $20 million Ponzi scheme. In the complaint, the SEC alleged that she and her retail sports apparel business, DJB Holdings, sold a fraudulent unregistered securities offering that raised more than $20 million from at least 46 investors from December 2014 to July 2017.

At the same time in a parallel case, the U.S. Attorney's Office in Maryland unsealed criminal charges against Ms. Bennett, and an affidavit based on testimony of an FBI special agent reveals Ms. Bennett's devotion to witchcraft.

After getting a federal search warrant at the start of August, FBI agents searched Ms. Bennett's Chevy Chase, Md., penthouse and office in Washington D.C.

A photo attached to the affidavit reveal she had an Imelda Marcos type shoe fetish; she also kept dozens of sealed Mason jars in the freezer of her apartment with "identifying information" of three SEC attorneys, including their initials scrawled on the jars' lids. According to the affidavit, this suggested "that Bennett had many times cast a 'hoodoo spell' in hopes of paranormally silencing the SEC attorneys investigating Bennett."

Hoodoo and voodoo spells are synonymous, according to special agent Keith Custer. "In handwritten notes on Dawn J. Bennett-styled stationary, along with other directions such as slitting open animal tongue, the instructions called on the spell-caster to state the name of the individual on whom to cast the spell followed by this chant: 'I cross over you, come under my command. I command you to hold your tongue.'"

In more worldly affairs, she also allegedly spent $500,000 a year in clients' money to pay for a suite at the Dallas Cowboys football stadium.

In her office, FBI agents found what could be an "excuse list" for employees explaining why Ms. Bennett was absent, according to the FBI. Callers were to be told she was out on business travel, while the SEC was to be told Ms. Bennett was out until September. Another unnamed individual was to be informed that she was in New Mexico, while another was to be told something different, that she was in Asia getting the manufacturing for her clothing line ready for 2018.

Greg Morvillo, Ms. Bennett's attorney, did not return a call on Wednesday for comment.

Over the past couple of years, Ms. Bennett has repeatedly been in trouble with the SEC, which charged her in September 2015 for allegedly inflating both the amount of assets under management by her firm, Bennett Group Financial Services, and the investment returns obtained by the firm. After failing to appear last year at an SEC hearing before an administrative judge, she was barred from the securities industry this March, according to her BrokerCheck profile. She has half-a-dozen pending customer complaints against her.

The last time InvestmentNews reported about a financial adviser invoking witchcraft was in 2009, when an adviser from Tennessee was sentenced to 12 years in prison for stealing $19 million from some 35,000 victims nationwide.

The rep, Barry R. Stokes, spent time making voodoo dolls of his victims to ward off their damaging testimony, prosecutors said at the time.

Mr. Stokes also paid a psychic with a credit card to give him readings while in jail, according to prosecutors. He also wrote a letter to the psychic saying that he was lighting candles and throwing salt over his shoulder to keep critics and creditors at bay, according to a press report.

Through her alleged fraud, Ms. Bennett swindled elderly clients of their life savings. To generate interest in the unregistered securities, she offered a whopping, out-sized return of 15% on clients' money, telling them the investment in her sportswear company was low risk, according to the SEC and FBI.

That pitch is eerily reminiscent of many Ponzi schemers who defrauded the same kind of investors in 2008 and 2009. The credit crisis revealed that investment advisers who touted low risk, high return strategies for years before the crisis at times wound up running Ponzi frauds. In 2010, InvestmentNews tracked Ponzi schemes with more than $9.2 billion in losses.

What does all this mean, if anything? Is Ms. Bennett's alleged Ponzi scheme a harbinger of other such frauds, waiting to be revealed when clients are desperate for their money? Is Ms. Bennett's alleged Ponzi scheme a strange one-off, or does it reveal something more pernicious?

If other significant Ponzis come to light in the next few months, then Ms. Bennett, I fear, will have proved to be an omen of tough times ahead for advisers and their clients.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 30

Conference

Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video

INTV

Help special needs families get started on a lifetime of planning

Managing editor Christina Nelson talks with special projects editor Liz Skinner about specialists who say any adviser can and should get the financial ball rolling for people in this community.

Video Spotlight

Are Your Clients Prepared For Market Downturns?

Sponsored by Prudential

Video Spotlight

Path to growth

Video Spotlight

Path to growth

Latest news & opinion

Top 10 financial firms ranked by investor satisfaction

Find out which firm took the top slot for overall investor satisfaction for the second year in a row.

What not to say to clients when the markets drop

Here's what advisers should steer clear of saying the next time stocks turn downward.

SEC bars former rep for alleged share price manipulation

George Thoreson tried to keep penny stock's price high to enable Nasdaq listing.

Nevada fiduciary law raises concerns among retirement professionals, brokerage industry

Critics complain that it conflicts with ERISA and SEC rules and has potential to spur other states to pass their own version of a fiduciary rule.

A special need for financial advice

Advisers don't have to be experts to help special needs families get a jump on lifelong planning.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print