Although suspended from the industry in 2006, an adviser continued soliciting funds from clients for years afterwards — netting over $1 million which he used to partly pay for his personal expenses, authorities say.
Ex-adviser Daniel Spiranac, who got the funds from 11 clients, pleaded guilty to securities fraud last month in Colorado state court, according to court documents.
Spiranac was an industry veteran, having started his financial services career in 1982 for firms including Allmerica Investments and Westwind Investment Services. He had no client complaints listed on his FINRA BrokerCheck record.
But in 2006 Spiranac was suspended by Colorado's securities regulator for five years for failing to disclose material facts about investments to clients, per BrokerCheck.
Despite his suspension, he again solicited funds from investors to buy equity in Dharma Partners, a company he controlled, and to purchase promissory notes, authorities say. Between 2009 and 2013, convinced clients to invest over $1 million in funds, promising them returns of up to 15%.
In one instance, Spiranac solicited funds from one client at her Denver home, getting $40,000 in return for a signed promissory note that pledged to repay the principal, plus 15% interest. The client was not named in the court documents.
Neither Spiranac nor his attorney could be reached for immediate comment.
Authorities say they started their investigation after an elderly woman, who had given Spiranac about $75,000, reached out to them.
"Mr. Spiranac fell into a classic Ponzi scheme method of repaying early investors with new investment funds because neither Dharma partners nor Rubicon were actually producing income, let alone enough to pay interest on the promissory notes," Colorado Securities Commissioner Gerald Rome said in a statement. "The fraud was further complicated, however, by the fact that he also used investor funds for personal expenses. Once it reaches that point it’s not simply bad business, but criminal conduct."
Spiranac, who was based in Colorado Springs, has been sentenced to 30 days in jail and four years of probation with a condition being the payment of restitution to his victims. The amount to be repaid will be set at a future hearing.