Earlier this month, a federal court in New Jersey entered a judgment against Scott Newsholme, an investment adviser and tax-preparer out of New Jersey, for defrauding his clients in excess of $1 million.
The Complaint of the Securities and Exchange Commission alleged that Newsholme fabricated securities account statements, doctored stock certificates, and forged promissory notes — all in furtherance of his investment scheme to induce clients to invest. Instead of investing, Newsholme pocketed the loot which he used to gamble and pay personal expenses, while assuring clients that their assets were safe and profitable, the SEC claims.
The SEC further alleged that Newsholme made Ponzi-like payments to certain investors who inquired about their investments, presumably to keep them quiet to not endanger his ongoing securities fraud.
Newsholme settled with the SEC, consenting to injunctions against future violations of the anti-fraud provisions under the federal securities laws, and agreeing to pay disgorgement, prejudgment interest and a civil penalty, the amounts of which will be later ordered by the Court. This settlement structure is known as a “bifurcated settlement” in which the liability aspect of the SEC case is resolved while leaving open the amounts of the financial remedies. Newsholme also pled guilty to parallel criminal charges.
As a former SEC enforcement lawyer, and now SEC defense lawyer, I have seen these cases before. Whether originally intended to be a Ponzi scheme, or through unanticipated, snowballing losses and an unwillingness by the financial adviser to timely disclose the truth, the end result is the same: defrauded investors, significant investor losses and SEC investigations and prosecutions.
It is thus critical for investment advisers when faced with a SEC investigation to immediately contact a qualified SEC defense lawyer. An SEC defense lawyer can take timely action to protect your legal rights and provide strategic advice in an attempt to minimize, and perhaps eliminate, legal exposure.
David Chase, a SEC defense attorney, heads the Law Firm of David R. Chase, a SEC defense law firm, which represents individuals under SEC investigations around the country. If you are under investigation for securities fraud by the SEC, securities regulator or the DOJ, contact David Chase, a SEC defense lawyer, for a confidential, no-cost consultation at: (800) 760-0912 or by email at: david@davidchaselaw.com.
