Army veteran Leroy Brown Jr. pitched fellow veterans and soldiers with outlandish lies in a brazen affinity fraud, yet still managed to attract "substantial" deposits.
That's according to an SEC complaint that convinced a federal judge to freeze his assets.
Neither he nor his firm is licensed with any state or federal regulator, according to the SEC. In fact, he has no experience at all in the financial services industry, the commission says.
Brown began his fraud about a year ago by guaranteeing to double or triple clients' money in 120 days "in a conservative way," the commission says. Instead, the 32-year-old resident of Killeen, Texas, deposited his clients' funds into his personal brokerage account before moving them over to his personal bank accounts, the complaint says.
Brown did legally form a company called LB Stocks & Trades with the Texas Secretary of State in April, 2014. Then he claimed on his Facebook page that he has been the CEO of the firm since 2004, the commission says. Brown also claimed to have 63 brokers working for him (the SEC says he has none), as well as 65,000 clients and business relationships with large corporate partners, including Apple, Sony, Best Buy and USA today.
On his firm's website, Brown refers to LB as "an independent company that performs research on stock symbols, historical prices, and ownership. Our company have (sic) and will continue to relentlessly challenge any company on the market in regards to giving actual facts on the stocks & trade industry. LB S&T have (sic) been the underdog in financial services for many years while we worked for big companies, now it's our time to work for YOU as well as many that want to get ahead."
"It is improbable that LB Stocks has more than 65,000 clients or that it maintains relationships with these large, well-known companies," the SEC complaint says.
Many of Brown's victims are stationed at nearby Fort Hood, it says.
Trust is a bedrock principle to our military, and we allege that Brown exploited his own military experience and abused that trust for his own personal gain, David Woodcock, director of the SECs Fort Worth Regional Office, is quoted as saying in a release about the action. Investment fraud is always wrong, but its especially pernicious when perpetrated against those who have sacrificed so much for our freedom.
Brown served in the army for more than a decade ending in July, 2013, and began soliciting active duty soldiers and veterans about a year later in January, 2014, the complaint says.
"Brown appears to be unknowledgeable about the financial services industry, investments, and the securities industry generally," the complaint adds.
Brown did not immediately respond to a request for comment sent via his website.
A federal judge in Waco, Texas, granted the commission a temporary restraining order, freezing Brown's assets. The SEC also seeks "permanent injunctive relief" and disgorgement of ill-gotten gains, along with interest and penalties.
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