Adviser allegedly hid the true amount of fees he was charging them, leading the couple to pay $1.2 million more than they thought they were being charged.
The Securities and Exchange Commission has charged Jeremy Drake, a Los Angeles-based RIA, with defrauding a professional athlete and the athlete's wife, by deceiving them about the investment advisory fees they were paying.
The SEC alleges that Mr. Drake concealed the true amount of fees his clients were paying by creating and sending false documents and masquerading as another person to corroborate his lies.
The SEC alleges that Mr. Drake, then with HCR Wealth Advisors, deceived the clients for more than three years, telling them that they paid a special "VIP" annual fee of 0.15% to 0.20% of their assets under management, when in fact they paid 1%. The SEC charges that Mr. Drake's deception led the clients, whom it did not name, to pay $1.2 million more in management fees than the adviser represented.
Mr. Drake received approximately $900,000 of incentive-based compensation based on the fees paid by the clients during the course of his deception, the SEC said in a release.
According to the SEC's complaint, when one of the clients demanded an explanation about the fees in June 2016, Mr. Drake created the persona of "Ron Stenson," who purportedly corroborated the adviser's story. When the creation of "Mr. Stenson" was discovered, the complaint alleges that Mr. Drake admitted that he had been lying, but warned that reporting his misconduct could result in negative publicity.
The SEC charged Mr. Drake with violating and aiding and abetting violations of the anti-fraud provisions of the Investment Advisers Act of 1940. It is seeking a permanent injunction, return of the allegedly ill-gotten gains plus interest, and penalties.
