The SEC barred a former Texas adviser for defrauding clients, including friends and business associates, out of $2.12 million in a part-Ponzi scheme.
Ex-adviser Wade James Lawrence, who is now in prison for the scheme, pled guilty to one count of securities fraud in which he solicited funds from clients for high-risk investments, including options on the Chicago Board Volatility Index, by promising a 20% to 100% return, according to the SEC and federal court authorities.
In reality, he used most of the money for personal expenditures, including travel, mortgage payments on his house, and a $10,000 piece of jewelry, according to court documents.
The SEC barred Lawrence, age 44, from the financial industry as well as participation in any penny stock offerings in an administrative settlement. The commission also filed a civil proceeding against Lawrence with his consent in February, which it later decided not to pursue in light of the criminal conviction and prison sentence.
'LONGSTANDING RELATIONSHIPS' WITH DEFRAUDED CLIENTS
The Dallas-based Lawrence launched his scheme between 2010 and 2013, the SEC said, during which FINRA BrokerCheck records show he was working for Oppenheimer and Southwest Securities. He resigned from Oppenheimer in 2011 after the firm filed a complaint against him for unauthorized trading that cost a client $71,261, according to FINRA. He has 16 disclosure events on BrokerCheck and was permanently barred by the independent regulator.
Lawrence continued his pattern of behavior at Southwest, a boutique brokerage that has since been acquired by Hilltop Holdings. According to the SEC, he defrauded at least 18 clients of $2.12 million by placing numerous unauthorized trades in their accounts, for which he received $28,700 in advisory fees. Many of these clients were individuals with whom he had long-standing personal and business relationships and who trusted him, according to a deposition.
In addition, Lawrence also solicited some $480,000 from five clients with the false representation that he would trade securities for their benefit in his own brokerage account, the commission said. He applied most of it for personal use, but did return about $50,000 through funds he obtained from other investors.
FUNDS USED TO TRAVEL AND PAY OFF MORTGAGE
According to court documents, Lawrence directed each of the clients to mail or wire transfer investment funds to his personal account at Wells Fargo. He lied that he would use the money to invest in real estate, stocks such as Facebook and Southwest Securities, and options on the Volatility Index.
To cover up the fact that he was instead directing the funds towards travelling and paying down his mortgage, he created fictitious account balances and sent them to investors via text message.
For his crimes, Lawrence was sentenced to three years in prison by the U.S. District Court in the Northern District of Texas, which he started serving in March. The court ordered him to pay $1.43 million in restitution to 12 clients and forfeit $126,074 from the sale of property acquired through the fraud.
Lawrence is also facing two years of probation upon release, during which he shall not seek re-employment in the financial services industry without approval.
Lawrence was represented by Michael John Uhl, an attorney with Fitzpatrick Hagood Smith & Uhl in Dallas. He did not respond to requests for comment.
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