SEC Charges LPL Stockbroker With Ponzi Scheme

James Thomas Booth of Norwalk Connecticut a stockbroker formerly registered with both LPL Financial LLC and Invest Financial Corporation and the founder of Booth Financial Associates has been charged by Securities Exchange Commission (SEC) in a Complaint alleging that Booth engaged in a Ponzi scheme in which forty investors were defrauded. SEC v. James T. Booth Civil Action No. 3:19-cv-01535 (Sept. 30, 2019).

According to the Complaint, starting in 2014, customers of LPL Financial and Booth Financial were solicited by Booth to place their assets in investments that were not offered through LPL Financial. Booth allegedly steered the customers towards purchasing the outside investments by promising them a safe way to generate greater returns.

SEC alleged that to make the purchases of investments Booth described, customers were instructed by the stockbroker to wire funds to a banking account owned by Insurance Trends – a company that Booth somehow controlled that was never meaningfully discussed with investors. Allegedly, customers acting on Booth’s instructions liquidated their insurance or annuities policies as well as brokerage or advisory accounts, and either wired funds to Insurance Trends or provided Booth with checks made payable to that company. The Complaint alleged that Insurance Trends was utilized by Booth as a conduit for stealing customers’ funds.

The Complaint alleged that between August of 2014 and June of 2019, as much as $3,900,000.00 had been transferred by Booth from the Insurance Trends accounts to Booth’s own accounts. SEC alleged that unbeknownst to the customers and without their consent, their funds were consumed by Booth to pay for, inter alia, casino trips and entertainment expenses. SEC alleged that at least some of the customers that requested redemptions had been repaid with other customers’ funds through Booth’s Ponzi scheme. Allegedly, these payments to customers evidenced another use of customer funds which had not been disclosed to the customers and which was not authorized by them.

SEC also contended that steps had been taken by Booth to conceal the Ponzi scheme he effected as well as his theft of the customers’ funds. Allegedly, he disseminated bogus quarterly or semi-annual statements to customers displaying shares owned, total returns, market values, and ticker symbols.

Allegedly, the branch office in which Booth worked had been visited unexpectedly by LPL on May 29, 2019, in which LPL questioned Booth about Insurance Trends and the investment transactions he executed with customers of the firm. The Complaint stated that Booth admitted that, inter alia: he misappropriated his brokerage and advisory customers’ funds; stole as much as $10,000,000 through his execution of a Ponzi scheme; and utilized customers’ funds to cover Booth’s own expenses despite this running contrary to the promises or representations he made to the customers.

SEC alleged that Booth engaged in fraudulent conduct violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5; Securities Act of 1933 Section 17(a); and Investment Advisers Act Sections 206(1) and 206(2).

Booth is also the subject of an indictment charging him with investment advisor fraud, wire fraud and securities fraud; conduct violative of 15 U.S.C. Sections 78j(b), 78ff, 80b-6 and 80b-17, and 18 U.S.C. Section 1343. United States v. James T. Booth Case 1:19-cr-00699-JGK (S.D.N.Y. Sept. 27, 2019).

In addition, Booth has been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity supported by findings that he converted at least $1,000,000.00 from customers; conduct violative of FINRA Rules 2010 and 2150(a). Letter of Acceptance Waiver and Consent No. 2019062787101 (July 1, 2019).

Also, FINRA Disclosure reveals that Booth has been identified in twenty six customer initiated investment related disputes that concern accusations of his misconduct while employed by securities broker dealers including Cadaret Grant, Invest Financial Corporation and LPL Financial. For example, between July 22, 2019 and September 13, 2019, sixteen customers filed investment related disputes involving Booth’s conduct where the customers alleged that their funds had been converted or misappropriated through the stockbroker’s Ponzi scheme.

LPL Financial has yet to settle any of these cases.

Booth was discharged by LPL Financial LLC on June 26, 2019 after he admitting to having defrauded customers of the firm.