Former Wells Fargo and Morgan Stanley broker Elias Herbert Hafen, who was sentenced to 30 months in prison in early February for having defrauded his clients out of more than $1.6 million, has entered into a final consent judgment with the Securities and Exchange Commission. As part of the deal, he agreed to a permanent bar from the securities industry.
Mr. Hafen, who was fired by Wells Fargo in August 2018 and barred by the Financial Industry Regulatory Authority Inc. in October 2018, “was every investor’s worst nightmare,” U.S. Attorney Geoffrey S. Berman said in September, when Mr. Hafen pleaded guilty to the charges against him.
“Mr. Hafen never invested his clients’ money and instead used it to fund his own lavish lifestyle,” Mr. Berman said.
From 2013 until 2018, while he was a broker at Morgan Stanley, Mr. Hafen engaged in a scheme to defraud at least 11 of his financial advisory clients into believing that he had access to a high-yield investment fund with guaranteed returns, which was not affiliated with Morgan Stanley.
When he was sentenced last month, Mr. Hafen was ordered to pay restitution of $745,000 and forfeit $806,750.
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.
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"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.
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