On May 30, 2018 the Securities and Exchange Commission (“SEC”) charged Steven Pagartanis (“Mr. Pagartanis”) with an $8 million fraud. Mr. Pagartanis was a registered representative of Lombard Securities Incorporated (“Lombard Securities”), an SEC registered broker-dealer. The SEC alleges Mr. Pagartanis had clients, including elderly retirees, write checks to an entity that he controlled that was similarly named to Lombard Securities.
Mr. Pagartanis promised the funds would be safe, and represented guaranteed monthly payments to his clients, while in fact he used the funds to pay personal expenses, or to make interest payments to earlier investors. Mr. Pagartanis hid this fraudulent, illicit activity from investors by creating fictitious account statements showing real estate holdings and interests in private development companies that did not in fact exist. Marc P. Berger, Director of the SEC’s New York Regional Office, said of the fraud: “[A]s part of the alleged scam, Pagartanis preyed on his customers’ trust, duping them to write checks payable to his own entity…regardless of how long investors have worked with their brokers, they should always confirm that recommended investments are approved for sale by their brokerage firm before transferring funds.”
When Financial Advisors engage in fraud and criminal behavior and steal victim’s funds, often times the funds have been spent and are difficult to recover. In some instances, the broker-dealer, custodian, or clearing firm that was involved in holding client accounts for the Financial Advisor that defrauded clients can be held liable for losses caused by the criminal activities of the Financial Advisor.