The SEC has frozen the assets of a New York investment advisor accused of defrauding investors in five offshore funds from whom he raised more than $74 million.

The SEC also alleges in a suit filed in Islip, N.Y., that the advisor used some of those funds, raised since 2005, to buy a $3.35 million beach resort on Long Island being developed by a relative.

The investment advisor, Brian Raymond Callahan of Old Westbury, N.Y., is disputing central allegations in the case, according to his lawyer.

“This is not a situation where somebody raised a bunch of money and spent it all,” Robert Knuts of the New York law firm Park & Jensen told Financial Planning.

Knuts said that “monies were invested in various assets and [Callahan] hopes investors will be paid back in full.”

Callahan did not respond to a request for comment.

Callahan is accused of telling some of the two dozen investors in the offshore funds that their money would be placed in liquid assets held in hedge funds but, instead, diverting those funds to his brother-in-law’s beach resort project that was facing foreclosure. In return for those investments, the SEC alleges he received unsecured, illiquid promissory notes. The value of those promissory notes was later inflated, according to the commission.

The SEC further states that Callahan failed to disclose to his investors that in 2009 he consented to a permanent bar from association with any FINRA member. The ban resulted from his creating false documents and refusing to participate in FINRA investigations, among other things, according to the complaint. In this case, the SEC says that Callahan also has refused to provide sworn testimony or to cooperate in their investigation of the allegations.

In a specific example, the SEC’s suit says that, in 2008, Callahan “lured” a California schoolteacher to invest $270,000 “with false assurances that her money would be invested in a secure short term/fixed-income cash fund.” However, according to the suit, none of the schoolteacher’s assets were placed in liquid holdings.

“Callahan misled investors in his funds with false promises, and he enriched himself at their expense when he diverted fund assets for his personal use and pocketed inflated management fees,” said Antonia Chion, associate director in the SEC’s Division of Enforcement.

Ann Marsh writes for Financial Planning.