Finra arbitration panel awards investor $276,000 in Woodbridge Ponzi scheme case

Quest Capital Strategies Inc. must pay award for actions of an ex-broker who sold mortgage notes without permission of the firm

Jan 28, 2019 @ 12:43 pm

By InvestmentNews

A Financial Industry Regulatory Authority Inc. arbitration panel has awarded $276,226 to an investor who lost money buying securities in what turned out to be a Ponzi scheme.

Independent broker-dealer Quest Capital Strategies Inc. must pay the award for not supervising more closely one of its brokers, Frank R. Dietrich, who sold the investor $400,000 worth of mortgage notes sponsored by Woodbridge Group of Companies.

Woodbridge, which was called a $1.2 billion Ponzi scheme by the Securities and Exchange Commission, went bankrupt a little over a year ago. The law firm of Goodman & Nekvasil, which represented the investor, said it was the first Woodbridge case to go to a final arbitration hearing.

Quest allowed Mr. Dietrich, who sold $10.8 million worth of Woodbridge mortgage funds to 58 investors and earned $260,864 in commissions, to retire last March. The broker was barred by Finra in November for not getting approval from Quest to sell the Woodbridge notes.

(More: CEO in Woodbridge Ponzi scheme fined $120 million by SEC)

When he met Mr. Dietrich, investor John C. Medeiros, a retired Coast Guard veteran, was living in Virgina and taking care of his blind wife, according to the law firm. He received a marketing letter from Quest offering a $100 gift card to an Olive Garden restaurant if he met with Mr. Dietrich, according to the firm. The letter said the adviser specialized in the needs of retirees and offered "safety net" style investing and a lifetime income plan.

Mr. Medeiros ultimately lost $140,035 through his investments with Woodbridge, according to his lawyers.

According to his BrokerCheck report, Mr. Dietrich had a 23-year career in the secruities industry. He worked for Quest for five years and four other broker-dealers before that. He had 10 disclosure events detailed on his record, including seven customer complaints related to the sale of Woodbridge securities.


What do you think?

View comments

Recommended for you

Featured video


Why a #MeToo story about the financial advice industry was important to do

Reporter Greg Iacurci and editorial director Fred Gabriel discuss the survey behind our cover story on sexual harassment in the workplace.

Video Spotlight

We started as a boutique firm with huge ambitions. Schwab was a perfect fit.

Sponsored by Schwab Advisor Services

Recommended Video

Keys to a successful deal

Latest news & opinion

The AMT is no longer a problem for many clients

With income thresholds higher and a lower SALT deduction after tax reform, the AMT will realistically only apply to wealthy Americans with out-of-the-ordinary tax events.

Cetera, other broker-dealers refuse to sign Ohio National contracts

Advisers wonder what the lack of a formal brokerage agreement means from a regulatory standpoint.

10 millennials making their mark in Washington — and beyond

These next-generation leaders are raising their voices and gaining influence over financial advice regulation and legislation.

Warburg Pincus among private equity managers interested in acquiring Kestra Financial

Sources say Kestra is being valued at between $600 million and $800 million, about eight to 10 times EBITDA.

10 highest paid professions in America today

These are the top-paying jobs in the U.S., according to Glassdoor.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print