SEC bars former advisor, crypto trader

SEC bars former advisor, crypto trader
'Brokerage firms must broaden their horizons about what’s under scrutiny by regulators and what isn’t,' one compliance executive says.
MAY 31, 2024

The Securities and Exchange Commission on Thursday barred a former broker who told clients he was investing money into crypto assets but allegedly used the money to pay credit card bills as well as funneling cash to family members.

From February 2017 through May 2021, Gabriel Edelman and his two businesses, Creative Advancement and Edelman Blockchain Advisors, fraudulently offered and sold securities, using false and misleading statements, to at least four investors, raising from them a total of approximately $4.4 million, according to the SEC's 2022 lawsuit against the broker.

From 2010 to 2019, Edelman was a registered broker at Spartan Capital Securities in New York, according to his BrokerCheck profile, so there was some overlap in the time he worked as a broker and when the alleged scheme occurred.

Edelman on Friday morning could not be reached to comment.

Earlier this year, the Financial Industry Regulatory Authority Inc. warned the brokerage industry it was not telling the full truth about cryptocurrency assets when they discuss them with customers.

Brokerages were failing to comply with Finra rules that require their communications with the public be “fair and balanced” and provide a sound basis for evaluating facts regarding products and services, according to Finra. The self-regulator prohibits false, exaggerated and misleading claims.

Broker-dealers have a lot more to worry about in this day and age of electronic assets and trading, said Sander Ressler, managing director of Essential Edge Compliance Outsourcing Services.

"Brokerage firms must broaden their horizons about what’s under scrutiny by regulators and what isn’t," Ressler said. "If an advisor is doing anything on the side, including crypto, firms should assume those actions are under the purview of Finra and the SEC."

Edelman and the two businesses "falsely told investors that their funds would be invested in digital assets that they could obtain at a discount," according to the SEC's complaint. "However, [Edelman and the two businesses] did not intend to carry through on their promises and, in fact, invested only a small portion of investor funds in digital assets."

Edelman and his two businesses "used a significant portion of the remaining investor funds for Edelman’s own personal benefit—to pay [his] credit card bills and to pay significant amounts to Edelman’s family members—and, in Ponzi-like fashion, to make early repayments to investors to encourage their ever-larger investments with" Edelman and his firms, according to the SEC.

Edelman and his businesses failed to disclose to investors that they would use, or were using, their funds for any such personal expenses or to repay other investors, according to the SEC.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.