Whether it’s stocks, bonds, futures, derivatives, or any other type of security, the process of investing can be quite lucrative. The number of people who have become millionaires as a result their investment practices is incalculable, but there is probably one thing that they all could count on – either the business acuity to make good investment choices for themselves or they had good judgment in selecting an investment advisor. Granted, most of us will never become super-wealthy through our investments, but hopefully we will find an investment advisor who can help us make the right decisions to at least live comfortably in our retirement. This process often relies heavily upon trusting the knowledge and the rectitude of the investment advisor.
Regrettably, this trust is sometimes betrayed, as evidenced by a recent investigation initiated by the Securities and Exchange Commission (SEC). The SEC subsequently sought an emergency enforcement action against Albany, N.Y.-based investment advisor Scott Valente and his firm, The ELIV Group, LLC.
According to the allegations by the SEC, Valente and ELIV enticed 80 or so clients into investing $8.8 million. Valente misrepresented his abilities and the performance of his investment practice history by making claims that these clients would see large, regular returns on their investments. Furthermore, his assurances to clients further belied the truth of the matter in that investments that ELIV had made in the previous three years all failed to yield positive results and in fact, these investments suffered deficits.
The SEC’s complaint which was filed in U.S. District Court for the Southern District of New York, states that Valente boasted a 30-year career of successful investment practices that were “dedicated to the highest standards of service.” In the complaint, he also stated that he created ELIV Group because he felt there “had to be a better way for clients to achieve financial independence” than that as practiced by the corporate financial industry. What he neglected to tell his clients and prospective clients is that not only did he fail in his own personal financial life, (he filed for bankruptcy twice), but he was also forced out of the broker-dealer industry in 2009 by the Financial Industry Regulatory Authority (FINRA). This action by FINRA came on the heels of 21 disputes that were raised against him and his practices.
In addition to these misrepresentations, Valente used a significant portion of his clients’ funds to support his personal expenses. He used large cash withdrawals totaling over $2.6 million to pay for such items as home improvements and mortgage payments, even spending clients’ money on such frivolous and self-serving items as a vacation condo and jewelry. These narcissistic actions in conjunction with his inability to realize profits for his clients made a significant impact on the amount of funds that remain available. The SEC’s request for an emergency freeze is an effort to prevent further taxing of these dwindling funds as Valente is still in the process of garnering new clients through the misrepresentation of his abilities.
“Valente used his one-man advisory firm to fraudulently lure unsuspecting investors in the Albany and Warwick communities to invest millions of dollars with him as advisory clients,” said Andrew M. Calamari, director of the SEC’s New York Regional Office. “He said all the right things to make investors believe he was making the right investments and taking the right precautions with their money, but he was merely telling blatant false tales about the safety and success of the investments.”
The allegations by the SEC against Valente and ELIV Group state that clients were assured their principal investments were guaranteed because they were backed by a large money market fund. This was patently untrue and the majority of these investments were illiquid. Valente reassured his clients that he and his company engaged an independent auditor but this was also a falsehood because said auditor never actually existed. Additionally, falsified documents were sent to clients giving them a fictitious accounting of the monthly performance of their investments.
The SEC’s complaint charges Valente and ELIV with violating several sections of the SEC Act of 1934 as well as other violations. It is working to obtain a restraining order which will freeze any assets of Valente or ELIV Group as well as prevent them from continuing to commit such actions. Additionally, it is the aim of the SEC to obtain a final judgment which mandates that Valente and ELIV Group must disgorge any gains obtained through these actions, as well as pre-judgment interest and financial penalties.
The Blum Law Group specializes in helping people who have been victimized by brokers or investment firms. If you believe you have suffered financial losses as a result of the actions of Mr. Valente or ELIV Group, please give us a call at 1-877-STOCK-LAW for a free consultation.
(Sources: SEC; FINRA; Investment News)