SEC charges barred ex-Merrill broker behind Bain Capital private equity fraud

A former Merrill Lynch and Hilltop Securities broker has been charged by the Securities and Exchange Commission with defrauding clients through a fictitious private equity investment scheme that spanned nearly a decade.

The SEC’s June 27 complaint alleges that Rajesh Markan misled at least 10 clients between 2015 and mid-2024, soliciting roughly $2.9 million for an investment he called the “Intrinsic Value Portfolio.” Markan falsely claimed the fund was advised by a prominent New York-based private equity firm and promised above-market returns for investors willing to lock up their capital for six to 12 years.

In reality, according to the SEC, no such fund ever existed. Investigators say Markan misappropriated most of the funds for personal use and fabricated a paper trail – including faked client statements and a domain name presenting himself as an employee of the PE firm – to maintain the illusion of legitimate investments.

“None of these representations were true: the fund was fake and never existed, there was no association with the New York private equity firm, and Markan misappropriated most of the investors’ money for himself,” the SEC said in a release Friday.

FINRA barred Markan in October after he declined to cooperate with its investigation into the same conduct.

His BrokerCheck profile shows he parted ways with Merrill in 2022, then joined Hilltop Securities in Dallas, where he remained until August. The record also shows several customer disputes seeking damages ranging from $200,000 to $1,200,000.

In a separate June statement, investor law firm KlaymanToskes, which has been working on the case on behalf of several defrauded clients, said its investigations found misappropriated client funds, falsified account documents, and fabricated performance reports purporting to show returns from non-existent private equity and hedge funds supposedly offered by Bain Capital.

A known name in the world of private equity, Bain Capital has also figured in several deals in the US wealth space, including the take-private acquisition of Envestnet. It also took a minority stake in Carson Group in 2021.

The law firm alleges that Markan operated outside his employers’ official communication channels, using personal email and text messaging to promote the scheme.

Hilltop Securities was among 26 firms named by the SEC in a sweeping enforcement action last August, in which it paid a $1.6 million penalty over self-reported lapses in its internal recordkeeping.

KlaymanToskes noted that, despite investor complaints, “Merrill Lynch and Hilltop Securities allegedly did not intervene to prevent the ongoing misconduct by Markan.”

The SEC's enforcement action follows parallel criminal charges filed by the US Attorney’s Office in the Northern District of Texas, to which Markan pleaded guilty earlier in June.

In a settlement with the SEC that is still pending court approval, Markan agreed to be permanently enjoined from violating antifraud provisions. Monetary penalties, including disgorgement and prejudgment interest, will be determined at a later date.