RIA indicted for defrauding clients out of $1 million in trading scam
An RIA has been charged with defrauding clients out of more than $1 million by putting profitable trades in his personal accounts — while assigning unprofitable trades to his clients' accounts.
A federal grand jury in Chicago indicted Charles J. Dushek, president of Lisle, Illinois-based Capital Management Associates, charging him with nine counts of securities fraud and one count of employing a scheme to defraud a client.
Dushek allegedly made more than 16,000 purchases of publicly traded securities.
According to the indictment, Dushek allegedly made more than 16,000 purchases of publicly traded securities valued at more than $400 million without designating in advance whether he was trading personal funds or client funds.
$1 MILLION IN FOUR YEARS
Dushek then allegedly waited up to five days to allocate the trades so that he could select the profitable ones for his personal accounts and assign the losing ones to the accounts of unsuspecting clients. From July 2008 to August 2012, Dushek allegedly withdrew from his personal accounts more than $1 million in gains realized from the scheme.
A civil action was filed against Dushek, CMA and others by the SEC in 2013, arising out of similar facts alleged in the indictment.
The SEC obtained a final judgment against Dushek in 2014, ordering him to pay $1.9 million in disgorgement and prejudgment interest and a $150,000 civil penalty, and permanently enjoining him from violating sections of the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.
In a separate administrative proceeding, the commission permanently barred Dushek on Dec. 2, 2013, from association with any broker, dealer, investment adviser, municipal securities dealer, municipal adviser, transfer agent or nationally recognized statistical rating organization.
The phone number listed for Dushek's firm in Lisle has been disconnected.