Los Angeles Investment Adviser Charged With Securities Fraud For Stealing More Than $1.5 Million From Clients
Marc Broidy, the founder, Principal, and Chief Executive Officer of Broidy Wealth Advisors, LLC, was arrested earlier today on charges of securities fraud. Broidy allegedly schemed to defraud his clients by withdrawing over $640,000 in excess management fees and then misappropriating more than $865,000 worth of stock held in trusts, over which he was trustee, to conceal his fraudulent overbilling scheme. The defendant’s initial appearance is scheduled for this afternoon before United States Magistrate Judge Frederick F. Mumm at the United States Courthouse, 312 North Spring Street, Los Angeles, California. The government will seek his removal to the Eastern District of New York.
The charges and arrest were announced by Robert L. Capers, United States Attorney for the Eastern District of New York, and William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI).
“As alleged in the criminal complaint, through a web of lies and fabricated documents, Marc Broidy deceived his clients and betrayed their trust by using their investment accounts as his personal slush fund. When one client unearthed his fraudulent scheme, Broidy simply stole from another client in an effort to cover up his theft. However, his days of ‘robbing Peter to pay Paul’ have now come to an end,” stated United States Attorney Capers. Mr. Capers thanked the U.S. Securities and Exchange Commission, New York Regional Office (SEC), for their invaluable cooperation and assistance during the investigation.
“As alleged, Broidy overbilled clients while underreporting the management fees he deducted for his services. Despite being caught red-handed, he cashed out on stock held in trust accounts he was appointed to oversee, all in an effort to defray personal expenses. Financial crimes have the potential to turn lives upside down and inside out. Victims of these types of crimes deserve to see justice served. We would like to thank our colleagues from the FBI's Los Angeles Field Office for their assistance with this investigation,” stated FBI Assistant Director-in-Charge Sweeney.
According to the complaint unsealed this morning, from approximately November 2010 to July 2016, Broidy had discretionary authority to buy and sell securities in brokerage accounts he set up for his clients and was permitted to deduct management fees from those accounts as compensation. For three of his clients, instead of deducting the amounts he was permitted to bill, Broidy took more than $640,000 in excess fees. To hide his theft, Broidy falsified many of those clients’ Internal Revenue Service Form 1099s so that the forms reflected far less in management fees than Broidy actually took.
One client discovered the theft and forced Broidy to repay the stolen fees in a settlement. To pay the settlement and other personal expenses, such as credit card bills and house and car payments, Broidy sold more than $865,000 worth of stock held in trust accounts that another client had established for his children, and for which he had appointed Broidy trustee.
The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty. If convicted, Broidy faces a maximum sentence of 20 years in prison.
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The government’s case is being handled by the Office’s Business and Securities Fraud Section. Assistant United States Attorney Matthew Amatruda is in charge of the prosecution.
The charges were brought in connection with the President’s Financial Fraud Enforcement Task Force. The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations. Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants. For more information on the task force, please visit ww.StopFraud.gov.
Los Angeles, California