SEC charges Kansas RIA with defrauding clients

The Securities and Exchange Commission has charged registered investment adviser Douglas E. Elstun with defrauding clients out of millions of dollars and making unsuitable investments in leveraged ETFs without informing clients of the risks.

Elstun, of Lenexa, Kansas, operated Crossroads Financial Management, an RIA firm. The SEC’s complaint alleges that from 2015 through 2018, Elstun fraudulently overcharged his advisory clients by charging undisclosed fees, including higher advisory fees than clients had agreed to pay, and by applying the advisory fee to non-advisory assets, including bank account balances, equity in homes and other real estate, and the value of vehicles, thereby increasing the fees charged to those accounts.

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The complaint also alleges that he misled clients about his trading in high risk, daily leveraged and inverse exchange-traded funds by failing to disclose the substantial risks of buying and holding these products, and by inaccurately representing that the products functioned as "insurance" or a "hedge" for their portfolios when his trading strategy for these products actually created significant risk for clients.

The SEC is seeking permanent injunctions, disgorgement with prejudgment interest and civil penalties.