South Florida Arbitration & Litigation Lawyer Blog
In the Matter of Stephen B. Blankenship
October, 2012:
The United States Securities and Exchange Commission (Commission) recently announced the issuance of an Order Instituting Administrative Proceedings Pursuant to Section 15(b) of the Securities Exchange Act of 1934 and Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Stephen B. Blankenship. The Order finds that on September 12, 2012, Blankenship pled guilty to a two count criminal Information before the United States District Court for the District of Connecticut, in United States of America v. Stephen B. Blankenship, Criminal No. 12-197 (VLB). The Information alleged, among other things, that while acting as a registered representative of a broker-dealer and an investment adviser, Blankenship knowingly, willfully, and with the intent to defraud participated in a scheme to defraud his customers of Deer Hill Financial Group, LLC, an unregistered entity that Blankenship owned and operated in Danbury, Connecticut. The Information further alleged that from in or about 2002 and continuing until in or about March 2012, Blankenship enriched himself and Deer Hill by fraudulently obtaining money from Deer Hill customers through the sale of securities that would purportedly pay a safe return and by falsely representing that funds placed with Blankenship had been and would be used to purchase such securities. In furtherance of the scheme, Blankenship caused Deer Hill customers to provide him, by way of wire transfers and checks, approximately $800,000 in funds and diverted those funds for his own personal use and benefit, including to pay for personal expenses such as travel expenses, shopping, credit card payments, mortgage payments, improvements on his home, and for business expenses of Deer Hill. To corroborate the fraudulent misrepresentations that Blankenship made to Deer Hill customers, Blankenship sent his customers official-looking documents that contained false and misleading representations. The fraudulent documents that Blankenship sent included fraudulent “account statements” that reflected, among other things, fictitious holdings, fictitious transactions, fictitious prices for the securities, and fictitious balances. These account statements were sent to the Deer Hill customers for the purpose of lulling them into believing that their funds had been invested as represented, were secure, and were appreciating in value.
Based on the above, the Order bars Stephen B. Blankenship from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization; and bars him from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock.
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