gavel and courtroom judgement

Unregistered Adviser Guilty of Securities Fraud in 10-Year-Long Ponzi Scheme

George Heckler, an unregistered investment advisor and hedge fund manager based in Charleston, South Carolina, pled guilty of securities fraud last week.

Heckler pled guilty to the Securities and Exchange Commission (SEC) after he was charged for his role in defrauding tens of millions of dollars from investors over a ten-year period. According to court documents, Heckler raised more than $90 million between multiple funds that he controlled and pitched to investors.

The SEC stated in its complaint that Heckler raised funds through various entities, including:

  • Cassatt Short Term Trading Fund LP
  • CV Special Opportunity Fund LP
  • Conestoga Holdings LP
  • And others

Cassat Short Term Trading Fund and CV Special Opportunity Fund were formed to hide the losses from Conestoga Holdings, which incurred substantial losses as early as 2009.

The SEC’s complaint also states that Heckler solicited money from investors in order to pay back previous investors, which is a common theme found in Ponzi schemes. One investor reportedly invested over $9 million with Heckler, all of which Heckler used to pay previous investors and other financial obligations.

Heckler reportedly solicited investments by misrepresenting the objectives and performance of his funds, which he represented to be short-term trading funds. Heckler created phony financial statements for investors that indicated positive returns for his funds. In reality, Heckler hid the fact that the funds were losing massive amounts of money for the past ten years.

Red Flags & Lessons

Although hindsight is 20/20, there are various red flags in this case that could have been prevented with proper due diligence.

The first red flag is Heckler’s status as an unregistered investment adviser. Legitimate investment advisers are required to register with various federal and state authorities, including the SEC and FINRA. Although trusting your money with a registered investment adviser does not guarantee that your money is safe, it is much more dangerous to invest money with an unregistered adviser. A registered investment adviser has a fiduciary duty to his or her clients, whereas unregistered investment advisers do not.

Another red flag is Heckler’s misrepresentation of investor returns. The complaint alleges that Heckler created false financial statements regarding returns in his funds. In doing so, Heckler overstated the size of his fund by nearly $30 million – equating to almost 50% more than the actual size. Due diligence into the funds may have caught this overstatement before the money disappeared. Additionally, proper due diligence may have found these inconsistencies well before an investment was made with Heckler and his funds. Registered investment advisers are required to submit various documentation to regulatory entities, which may have prevented this in the first place.

Thirdly, as Heckler raised more than $90 million, it is likely that he was a skilled salesman. We have seen various cases where hardworking individuals and families were swindled by a good salesperson. These scam artists often use these tactics into soliciting investments. Thus, it is crucial to be aware of such individuals soliciting money for investments that sound too good to be true. As the saying goes, if it seems too good to be true, then it probably is.

Overall, it is more important than ever to be aware of where your money is going. There are many instances of investment fraud occurring on a daily basis, especially due to current financial uncertainty throughout the globe. People often think it could never happen to them until it does. Therefore, be aware of the major risks of a particular investment instead of being clouded by the potential upside that an individual or company is pitching to you.

Remember, whatever it is, let’s make sure our money is working for us and not for somebody else.

For financial litigation across the nation, including cases involving securities fraud, choose Vernon Litigation Group. Our attorneys are standing by to help you. Contact us now.

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