SEC Charges Previously-Barred Investment Adviser with Fraud

The Securities and Exchange Commission today charged a previously-barred North Carolina-based investment adviser with lying to retail investors about the use and value of their investments.

The SEC’s complaint alleges that, starting in approximately February 2019, David W. Schamens solicited investments in a purported pooled investment vehicle that would invest in pre-selected stocks, which would then be “auto-traded” by a proprietary algorithm. However, rather than using investor funds to engage in any type of trading, Schamens allegedly used the overwhelming majority of the money for personal expenses and to repay previous investors seeking redemptions.

The complaint also alleges that Schamens provided investors with fictitious monthly statements showing returns at times exceeding 80 percent and that he sought to conceal his actions by presenting investors with a phony audit letter verifying transactions and balances in the fund.  The complaint, filed in the U.S. District Court for the District of New Jersey, charges Schamens with violating antifraud provisions of the federal securities laws. The SEC seeks a permanent injunction, disgorgement, and penalties against Schamens.

“This is not the first time that David Schamens has been charged by the SEC for misconduct and serves as a good reminder for investors to research potential advisers,” said Richard R. Best, Director of the SEC’s New York Regional Office. “Before entrusting someone with managing your money, investors should visit Investor.gov where they can vet potential advisers.”

In 1992, the SEC charged Schamens for, among other things, misappropriating investor funds. As part of the settled charges, he was barred from association with any broker, dealer, municipal securities dealer, investment adviser, or investment company.

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Schamens.

The SEC’s investigation was conducted by Lindsay S. Moilanen, Neil Hendelman, and Sheldon L. Pollock, and the case was supervised by Lara S. Mehraban and Mr. Pollock. The litigation will be led by Ms. Moilanen and Philip Fortino. The SEC appreciates the assistance of the U.S. Attorney’s Office for the District of New Jersey and the Department of Homeland Security, Homeland Security Investigations, Newark Field Office. The SEC’s Office of Investor Education and Advocacy (OIEA) encourages investors to check the background of anyone selling or offering them an investment using the free and simple search tool on Investor.gov.

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