An ex-LPL Financial advisor and his friend, a barred broker, sold $3.3 million worth of unregistered securities in a lifestyle media company for mothers, according to the SEC.
Kerry L. Hoffman didn’t inform LPL of his role with GT Media — which operates as “Joy of Mom” — or disclose conflicts of interest to clients such as his 10% commission on the shares in GT, investigators say. The SEC
Tapped in 2015 by the Chicago-area blog and social media platform, Hoffman encouraged GT to hire formerly incarcerated broker Thomas V. Conwell to lead the sales, according to the SEC. They sold shares to 46 investors in 12 states over the next three years, investigators say.
LPL
In addition to the stock, Hoffman also loaned money to GT, offered clients convertible promissory notes in the company and later received payments out of the investments, according to the SEC. A widow who was his largest client bought $350,000 in the notes, investigators say.
Conwell, 59, sold $2.5 million of the unregistered securities, using about $161,000 of the proceeds on personal expenses, according to the SEC. He falsely told clients that two Fortune 500 companies were vying to purchase GT and that the firm would soon conduct an IPO, the SEC says.
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Attorneys for Conwell and Hoffman declined to discuss the case. LPL spokesman Jeffrey Mochal noted in an email that the firm separated affiliation from Hoffman last September. Hoffman didn’t contest the allegations listed on BrokerCheck in connection with the separation.
Hoffman “held a private investment and executed an agreement to act as a consultant to a company without disclosing or obtaining prior approval from LPL,” according to BrokerCheck. Family members and a few clients also made investments, the disclosure states.
GT
The Joy of Mom Facebook
“Nobody at Joy of Mom had anything to do with any fraud or misrepresentations,” says Kopecky, who represented GT before the SEC. “If Conwell or Hoffman did what they're accused of, it was without our knowledge or consent.”
Conwell, a childhood friend of Hoffman, pleaded guilty in 2006 to wire fraud and other charges stemming from an SEC case alleging he misappropriated brokerage clients’ money. The SEC had barred him from the industry in 2000.
After serving prison time, Conwell started a weekly radio show in Florida about business and finance. With clients buying the GT stock at $1 per share, he said the company turned down an offer to be acquired at $9 a share, according to the latest SEC charges against him.
He also claimed the company “was negotiating an agreement to be acquired in the range of $15 to $25 per share and led investors to believe that they needed to act quickly to buy GT Media stock before such an acquisition or initial public offering occurred,” the complaint states.
The company hadn’t taken any steps toward an IPO or received any interest from a potential acquirer. In fact, GT had “had little or no income or cash flow” other than the capital raised from the unregistered securities and the $77,600 loaned to it by Hoffman, according to the SEC.
Hoffman received $50,000 in commissions after selling $500,000 of the unregistered stock, investigators say. Out of the $2.5 million raised by Conwell, more than a quarter came from Hoffman’s advisory clients, the SEC says. GT paid Conwell $220,000 in commissions.
They face a combined five counts of anti-fraud and registration violations from the SEC, which is also seeking disgorgement of ill-gotten gains plus interest and civil penalties. Hoffman and Conwell do not have any criminal charges against them.
