The SEC charged barred advisor and former radio host Dawn Bennett with defrauding investors of $20 million in order to fund an "extravagant lifestyle" that included spending $1.45 million on a luxury suite at AT&T stadium where the Dallas Cowboys play.

The charges, filed in federal court Friday, deepen an already lengthy legal tussle between the regulator and Bennett, who has contested the constitutionality of the SEC's in-house forums for disciplining advisors for misconduct.

The SEC accuses Bennett, 55, of misleading 46 clients about an unregistered offering of convertible and promissory notes in DJBennett, a Washington-based sports apparel store she founded in 2010. Bennett, who served as CEO of the apparel store in addition to her advisory business, misled the clients about the financial condition of the company and how she intended to use their funds, the regulator alleges.

Bennett, whose independent firm was based in Washington, could not be reached for immediate comment.

The SEC headquarters
Bloomberg News

She allegedly told clients that the company had ample resources and could pay annual returns of 15%. DJBennett, however, was not profitable by the outset of the alleged fraud, according to the SEC. One client was told that funds would be used for "prototype and product development, patent filings, engineering services and other operating expenses."

Yet instead of using clients' funds on the business, Bennett spent approximately half of the $20 million raised on personal expenses, such as jewelry and mystics, and to repay earlier investors, "a hallmark of a Ponzi scheme," the SEC charges.

The barred advisor, who is the former host of "Financial Myth Busting with Dawn Bennett," had started her career in 1987, according to the SEC and FINRA BrokerCheck records.

At one point, she oversaw approximately $350 million in client assets, according to the SEC. But the former independent advisor started losing clients in 2012, and two years later her AUM dropped to $42 million.

DJBennett, meanwhile, suffered from falling sales and rising debt; the apparel store's liabilities rose to $15.6 million in 2016 from $2.6 million in 2014.

To reverse her declining fortunes, Bennett persuaded more clients to invest in the business. But she misrepresented its actual financial condition, according to the SEC. For example, she overstated the company's 2014 sales by $1 million, or 174%.

She then allegedly attempted to cover up the fraud by lying to regulators about the note sales and repaying investors with loans.

The SEC previously barred Bennett in 2015 for allegedly misrepresenting the AUM of her advisory firm, Bennett Group Financial Services, by at least $1.5 billion.

The FBI, FINRA and the U.S. Attorney's Office for the District of Maryland contributed to the SEC's investigation, according to the regulator.

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