An investment adviser was arrested Tuesday in connection with a $105 million securities fraud in Pennsylvania.
Brenda Smith, 59, of Philadelphia was charged with four counts of wire fraud and one count of securities fraud. If convicted, she faces a maximum of 20 years in prison on each of the fraud charges as well as fines. She was scheduled to appear in federal court in Newark, N.J., later in the day.
[Recommended video:
Biggest changes advisers should make to be successful in the future]
Ms. Smith was also charged with civil fraud by the the Securities and Exchange Commission. In a
complaint filed in federal court, the agency alleged that Ms. Smith and the fund she runs, Broad Reach Capital, raised $105 million from about 40 investors since 2016.
The SEC also charged two other firms under Ms. Smith's control, Broad Reach Partners and Bristol Advisors. All of the firms are located in West Conshohocken, Pa. Ms. Smith resides in Philadelphia.
(More:
Dawn Bennett appeals conviction of running $20 million Ponzi)
Ms. Smith touted a 30% yearly return through sophisticated trading strategies involving highly liquid securities she said her fund "was uniquely positioned to pursue because of its access to the Philadelphia Stock Exchange trading floor," the SEC complaint states.
Instead of investing client money as promised, Ms. Smith used most of it to buy her own investments and pay back other investors. In response to investor concerns, Broad Reach Capital distributed a false document in July valuing its assets at $180 million.
In reality, "the vast majority of investors' money is gone from the fund," the SEC complaint states.
The federal court granted the SEC's request for an asset freeze and a temporary restraining order. The SEC said it will seek disgorgement and civil penalties.
"An investment adviser serves in a position of trust and has a fiduciary duty to speak truthfully to clients," G. Jeffrey Boujoukos, director of the SEC's Philadelphia office, said in a statement. "We allege that Ms. Smith breached her clients' trust by misleading investors with false claims of how she invested their money and how those investments performed."
Ms. Smith could not immediately be reached for comment.
[More: Jeffrey Cutter SEC charges advisor with failing to disclose annuity commissions]
