A San Antonio investment advisor has been charged with operating a scheme to defraud nearly 300 investors and misappropriate some of their funds for his own personal expenses, according to ThinkAdvisor.
Robert J. Mueller, deeproot Funds LLC, and Policy Services Inc. were all named in a complaint filed by the Securities and Exchange Commission in U.S. District Court.
In its complaint, the SEC said Mueller and deeproot Funds convinced investors to sell annuities and individual retirement accounts held with other companies and put the assets into two pooled investment funds created by Mueller: the deeproot 575 Fund, LLC and the deeproot Growth Runs Deep Fund, LLC.
The investors, many of whom were retirees, put about $58 million into the funds from 2015 to at least February 2021. The investors were told the two funds would invest in life insurance policies and deeproot-related businesses, and that they would receive relatively safe returns.
Instead, the SEC stated, the defendants commingled the funds in deeproot and Policy Services bank accounts and spent less than $10 million on life insurance policies. Mueller allegedly funneled more than $30 million of the funds’ assets to other businesses he controlled, and used at least $820,000 of new investor funds to pay earlier investors. The commission also said that Mueller used over $1.5 million of the funds’ assets for hundreds of his personal expenses, including “his daughter’s private school tuition, vacations with his family, his second wedding, his second divorce, his third wedding, jewelry for both his second and third wives (including engagement rings and wedding bands for both wives), other lifestyle spending for and by his family, and to buy a condominium in Kauai, Hawaii.”
The SEC said Mueller declared his Fifth Amendment right against self-incrimination when he was questioned during testimony about using the funds to pay the personal expenses.
The complaint charges Mueller and deeproot Funds with violating the antifraud provisions of Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, Section 17(a) of the Securities Act of 1922, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
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