SEC Sues Adviser for Embezzling $200K

The Securities and Exchange Commission has sued KHF Advisor investment firm founder Knox Fuqua for allegedly embezzling money from his clients to pay for personal and business items. The SEC seeks permanent injunctions and an order directing that Fuqua get rid of all the ill-gotten gains and pay civil penalties. 

The complaint alleges that from January 2003 until late 2005, Fuqua engaged in fraudulent activity through KHF Advisors. Fuqua ignored his clients' investments wishes and instead paid for personal expenses--supermarket and pharmacy charges, along with jewelry purchases--totaling over $200,000.

Fuqua accomplished this by creating two investment vehicles, "which were little more than tools for Fuqua to access his client's money," the SEC report states. He then channeled client money through these investments vehicles and into bank accounts that he controlled and used some of the money to repay other clients wanting to redeem their investments.

One client swindled was Barbara Leonard, a widow with two children, who was under a court order to invest the estate of her late husband, conservatively for her children, according to Knight Rider. Another complaint involved misappropriation of a $600,000 401(k) retirement plan created by Community Healthy Systems.

Investors were unaware of the wrong doings because allegedly Fuqua deceived his clients into believing their investments contained value by inflating share prices and accounts balances on statements.

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