William J. Wells and Promitor Capital Management LLC. – Boca Raton, Florida Investment Advisor Fraud and Mismanagement Litigation and Arbitration Attorney

SEC Charges New Jersey Fund Manager With Securities Fraud

The Securities and Exchange Commission recently charged a New Jersey fund manager and his firm with defrauding investors by lying about his credentials, concealing trading losses, and using investor funds to make Ponzi-like payments to other investors.

The SEC’s complaint filed in federal court in Manhattan alleges that William J. Wells, of River Vale, New Jersey, falsely told some investors that he was a registered investment adviser and would invest their money in specific stocks. Instead, Wells and his firm, Promitor Capital Management LLC, are alleged to have invested mainly in high-risk options with poor results that Wells concealed with phony investor account statements that grossly inflated performance. Wells further attempted to hide the losses by using funds from new investors to make Ponzi-like payments to earlier investors, the complaint alleges. Wells allegedly raised more than $1.1 million from dozens of investors since 2009, but by late summer, the Promitor fund brokerage accounts held less than $35, with the rest dissipated by trading losses and Ponzi-like payments, or diverted into Wells’s personal bank account, the complaint alleges.

According to the complaint, when one investor was unable to get Wells to return a portion of his investment, he asked Wells by text, “You running Ponzi scheme? Why the heck is this going down like this.” Wells later responded by text saying, “My explanation is that I’m an idiot and was trying to get some big trades to. . . make you more money.”

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Wells.

The SEC’s complaint alleges that Wells and Promitor violated antifraud provisions of the federal securities laws and SEC antifraud rules. Wells also was charged with aiding and abetting liability and control person liability for Promitor’s alleged violations. The SEC is seeking permanent injunctions and financial penalties against Wells and Promitor, and return of allegedly ill-gotten gains with prejudgment interest.

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