Ex-advisor settles SEC suit alleging $71M swindle

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A California advisor who was barred and stripped of his license last August by the California Department of Business Oversight has agreed to settle a civil suit with the SEC alleging he perpetrated an elaborate multi-million dollar fraud on his clients.

The SEC accused William Jordan of Orange County, California, of swindling some 100 clients by persuading them to invest more than $71 million in 16 private funds offered by his two investment advisory companies, according to the regulator’s lawsuit filed in federal court.
From 2011 until 2016, while raising millions from his victims, Jordan lied to them about how their funds would be invested, about their investments’ performance and about his own disciplinary history, the SEC claims.

Jordan allegedly told his clients that their money would be used for certain disclosed purposes, that his compensation would be limited to particular amounts and that the funds were audited and custodied by third parties. Instead, he commingled their money, concealed the funds’ true performance, engaged in conflicted and undisclosed inter-fund transfers and overpaid himself, according to the SEC’s complaint.

To settle the charges, Jordan agreed to a permanent injunction, meaning he would halt the alleged fraudulent activity, the SEC says. Jordan settled the suit without admitting or denying the SEC’s allegations.

Jordan, who represented himself in the proceeding, could not be reached for comment. The phone number for William Jordan Associates, the company listed as Jordan’s current employer in his BrokerCheck report, was disconnected and the company’s website was inactive.

The core of Jordan’s misconduct, the SEC says, is that he commingled the 16 private investment funds, operating them as one pool of money and regularly moving money between them to meet cash flow needs. The transfers allowed certain funds that were low on cash to continue in operation and to distribute cash to investors in which new investor money was paid to existing investors, the SEC explains in the complaint.

“The money transfers also perpetrated the fraudulent notion that the funds were part of an enterprise with significant liquidity, when, in fact, they were not,” the regulator says.

The funds, along with Jordan’s affiliated entities, sought bankruptcy protection in May 2017 and are under the control of an independent chief restructuring officer.

At least eight of the funds falsely disclosed specific investment purposes with one, for example, saying that it would follow a “Warren Buffett Model,” which was described as businesses that can generate annual returns of more than 30% of the fund.

The SEC claims that Jordan overstated the value of the assets in several of the funds and used the inflated values and unrealized “profits” on other investments to boost the management fees and bonuses he and his entities collected. Between 2013 and 2016, his company received more than $3.7 million in fund management fees, plus approximately $1.9 million in bonuses, according to the complaint.

The SEC also alleges that the 16 funds were never audited, despite Jordan’s promises to investors. In addition, he attempted to create the impression that having third-party custodians for the funds enhanced investors’ safety when he, in fact, retained complete control over the accounts, according to the SEC.

The SEC will seek disgorgement of Jordan’s alleged ill-gotten gains. The amount of disgorgement, prejudgment interest and civil penalties will be determined by the court, the SEC says.

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Fraud Financial crimes Embezzling SEC enforcement Securities fraud SEC