A registered investment advisory firm and its two executives have been charged with devising a scheme that defrauded their clients out of over $75 million, the Securities and Exchange Commission announced last week.
The SEC filed civil charges in a federal court in North Carolina against Gregory E. Lindberg and Christopher Herwig, and their Malta-based registered investment adviser, Standard Advisory Services Limited.
The defendants were accused of breaching their fiduciary duties by fraudulently causing advisory clients to engage in undisclosed related-party transactions that were not in the clients’ best interest.
The SEC said that Lindberg and Herwig, through Standard Advisory, misappropriated more than $57 million in client funds. Standard Advisory also took in over $21.4 million in advisory fees. According to the SEC’s complaint, Lindberg allegedly ran the schemes through complex investment structures and a web of affiliate companies. He is accused of diverting the proceeds to the defendants or to Lindberg’s other businesses.
“We allege a massive fraudulent scheme, involving unique financial structures and various complex investments, orchestrated by the defendants for their own benefit over their advisory clients’ benefit,” said Osman Nawaz, Chief of the Division of Enforcement’s Complex Financial Instruments Unit. “Today’s filing demonstrates that the SEC will take action to protect investors from investment advisers who attempt to evade fundamental fiduciary responsibilities.”
Lindberg, Herwig, and Standard Advisory were charged with violating the antifraud provisions of the Investment Advisers Act of 1940. The SEC is seeking disgorgement of the gains plus prejudgment interest, penalties, and permanent injunctions.
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