The Securities and Exchange Commission has charged an unregistered investment adviser in New Jersey with defrauding about 40 clients of $5 million by selling investments in a fictitious investment fund and misappropriating a large portion of the funds raised.
The SEC is seeking injunctive relief, civil penalties and disgorgement of ill-gotten gains plus prejudgment interest.
According to the SEC's complaint, Terrence Chalk, of Passaic, New Jersey, and Orlando, Florida, previously had been convicted of identity theft and bank fraud and used the alias "Dr. Terrence Cash" to conceal his criminal past from investors. He presented himself as a successful investment adviser and as the chairman and founder of companies he referred to as "Greenlight."
From 2017 through 2020, the SEC complaint alleges that Chalk promised investors a regular dividend of no less than 12% per year and had his clients transfer retirement accounts and other savings to a self-directed IRA custodian to invest in the fictitious fund.
According to the complaint, instead of investing the funds, Chalk and his Greenlight Advantage Group and Greenlight Investment Partners misappropriated the vast majority of the money, with Chalk using more than $700,000 to pay personal expenses.
Chalk and the Greenlight companies allegedly used about $1.8 million of investors' funds to make purported dividend payments to investors in Ponzi-like fashion.
In a parallel action, the U.S. Attorney's Office for the Southern District of New York filed criminal charges of securities fraud and wire fraud against Chalk.
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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