SEC settles with RIA involved in $3 million Ponzi scheme

SEC settles with RIA involved in $3 million Ponzi scheme
Craig Rumbaugh and his California-based firms will pay $1 million for misleading investors
NOV 30, 2020

A California federal court has entered final judgments against Craig Rumbaugh and two companies he owns and controls in a case involving their role in a Ponzi scheme.

Without admitting or denying allegations brought in a complaint by the Securities and Exchange Commission, Rumbaugh and his two firms — Rumbaugh Financial, a California-registered investment adviser, and Desert Strategic Equity — agreed to pay $676,000 in disgorgement, with $137,808 in prejudgment interest. Rumbaugh consented to pay a civil penalty of $192,768.

In a related administrative proceeding, Rumbaugh also consented to an order that bars him from the securities business.

The SEC’s complaint, filed in August 2019, alleged that Rumbaugh advised RFI's clients to invest in promissory notes offered by Susan Werth, who claimed to provide short-term high-interest rate-loans to real estate developers but, unbeknownst to Rumbaugh, was actually operating a Ponzi scheme.

According to the complaint, from August 2015 to June 2016, Rumbaugh persuaded eight clients to invest a total of more than $3 million with Werth's companies. Three of those clients lost a total of more than $650,000 when Werth's Ponzi scheme collapsed.

The complaint alleged that Rumbaugh and his entities concealed commissions totaling $140,000 that Werth paid Rumbaugh on funds raised from his clients. Rumbaugh and his companies also allegedly misrepresented the interest rates Werth's promissory notes offered, and retained the difference when the notes repaid interest at a higher rate.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

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.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"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.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.