Ex advisor gets two years in prison for running fraudulent auto fund

Ex advisor gets two years in prison for running fraudulent auto fund
David Braeger is at least the second former advisor from Wisconsin this year to face prison time.
DEC 18, 2024

A former financial advisor based in Wisconsin was sentenced on Monday in federal court in Milwaukee to 24 months’ incarceration for committing an investment fraud scheme that resulted in a loss of over $2.5 million.  

David Braeger, 57, of Fox Point, Wisconsin, was a registered broker from 1992 to 2014 at 15 firms, according to his BrokerCheck profile. A securities industry rule of thumb is to be wary of brokers with a history of moving rapidly from firm to firm. Three of the last four firms he worked at, Newport Coast Securities Inc., Accelerated Capital Group, Midtown Partners, were all later expelled from the securities industry.

The Financial Industry Regulatory Authority Inc. barred Braeger from the securities industry in 2016, after it was alleged that he failed to follow customers' instructions and improperly used and converted $30,000 in the customers' funds. 

After he was barred from the securities industry, Braeger launched a fraudulent investment fund, according to the US Attorney’s Office.

“In 2017, Braeger incorporated an entity known as Blue Star Automotive Fund, in which he sold limited partnership shares to 27 investors who gave him over $5.4 million for those shares,” the US Attorney’s Office stated. “Braeger represented to those investors that those funds would primarily be used to fund an automobile dealership. Although Braeger provided approximately half of the money to the dealership, he misappropriated more than $2.5 million of investor funds in ways contrary to his representations.”  

Braeger spent his victims’ money on his own living expenses, including the purchase of several luxury vehicles and personal legal fees. Braeger also used his victims’ money to purchase the Silver Spring House Restaurant in Glendale, sponsor a NASCAR driver, and buy cryptocurrency.

In addition to the Blue Star Scheme, Braeger also stole $100,000 from an investor as part of a venture he called IEF, which Braeger claimed would be used to fund litigation related to a Ugandan Energy company. Instead, Braeger misappropriated most of that money for his own personal use, according to court records.

Braeger is at least the second former advisor from Wisconsin this year to face prison time.

Thomas Demergian, a 63-year-old investment advisor from Madison, over the summer was sentenced to four and a half years in federal prison for bilking his retiree clients out of more than $1 million dollars in a scheme that lasted more than two decades.

Demergian, who defrauded clients of $1.8 million, was sentenced over charges of wire fraud and tax evasion.

Demergian pleaded guilty to the charges in April and began serving his sentence this month. Beyond the prison sentence, he has been ordered to pay restitution.

His scheme began in 2000, when he persuaded clients to invest through a business called IRT Company, according to the U.S. Attorney’s Office.

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