Stockbroker and Account Executive Misconduct – Boca Raton, Florida Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Securities and Exchange Commission v. Malcolm Segal, Civil Action No. 15-3668 (E.D. Pa.)

SEC Charges Former Stockbroker with Conducting Ponzi Scheme

The Securities and Exchange Commission recently charged a former stockbroker in Pennsylvania with conducting a Ponzi scheme and stealing investor money to purchase a condominium in Florida and afford his own vacations and other luxuries.

The SEC alleges that Malcolm Segal fraudulently sold so-called certificates of deposits (CDs) to his brokerage customers by falsely claiming that he could get them higher interest rates of return on FDIC-insured CDs than otherwise available to the general public. In some instances, Segal purchased CDs on behalf of investors but secretly redeemed them early and took the proceeds. Other times, Segal did not purchase CDs at all despite telling customers he had. He raised approximately $15.5 million from at least 50 investors. Besides spending investor money on himself, Segal used it in Ponzi scheme fashion for purported interest payments and principal repayments to earlier investors.

The Commission further alleges that Segal eventually started stealing directly from his customers’ brokerage accounts in a last-ditch effort to keep funding the Ponzi payments. He forged letters of authorization to facilitate the transfer of customer funds to accounts he controlled, notably forging the signature of one customer’s wife who had died before the date of the transfer. The scheme collapsed in July 2014.

In a parallel action, the U.S. Attorney’s Office for the Eastern District of Pennsylvania today announced criminal charges against Segal.

The SEC’s complaint filed in federal court in Philadelphia charges Segal with violations of Section 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. The SEC seeks disgorgement plus prejudgment interest and penalties as well as a permanent injunction.

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