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SEC accuses former Ameriprise adviser of not disclosing disputes

According to reports, the Securities and Exchange Commission has accused former Ameriprise Dual Registrar Richard Hoffman of soliciting investments from clients in an alleged crypto-trading Ponzi scheme operated by two twenty fraudsters, one of whom allegedly belonged to the Colombo crime family. relation. The commission said Hoffman failed to disclose the fraudulent firm it offered up to $1.5 million in the form of low-interest loans in return for bringing in investors.

according to this SEC complaint filed in Arizona federal courtBeginning in March 2019, Zima Global Ventures through its affiliate company Zima Digital Assets offered up to $25 million in “membership units” to allegedly trade in crypto and other digital assets.

As the Phoenix Business Journal reports, Zima was co-founded by Zach Walter and John Michael Caruso, the latter of whom called himself the “Michael Jordan of algorithmic cryptocurrency trading” and called himself “Kryp+0 K!ng”. “Nicknamed. , Both promised that investors would see huge gains from their efforts in crypto day trading.

To help find investors, Zima agreed to offer low-interest, unsecured loans to Hoffman, which was based in Peoria, Arizona and had been with Ameriprise since 2016.

According to the commission, during 2019, Hoffman convinced eight clients to invest more than $640,000 in Zima’s offer, with Hoffman receiving at least $170,000 in loans from Zima. Hoffman will ask clients to pursue investments in Zima’s securities via email, text and phone calls.

“When recommending subscription units to customers, Hoffman failed to disclose the lending agreement and, over time, the fact that it owed Zima tens of thousands of dollars,” the complaint said. Hoffman also did not disclose the resulting conflicts of interest created by the lending agreement.

Zima was a big business for its founders, who made major displays of their alleged wealth on social media and reportedly convinced athletes and celebrities to invest with them. But according to the Phoenix New Times, his conduct caught the attention of federal investigators; On January 30, 2020, US Secret Service agents arrested the two, who were charged by the DOJ with wire fraud and conspiracy to commit money laundering. Caruso, born in 1991, is the son of mobster John Caruso Sr., and had already served a prison sentence for helping his father with an extortion scheme and falsifying loan documents, the New Times reports.

Eventually, investigators discovered more than 100 investors who lost more than $7.5 million. According to the New Times, the two reportedly spent money on personal expenses including private jets, million-dollar mansions and luxury cars. Investigators say Zima was a Ponzi scheme; They found no evidence of any actual crypto purchases or transactions on crypto exchanges. The money was used to generate returns in the pockets of both the previous investors and the others.

But in November of 2019, the plan was still going strong, and Hoffman continued to solicit clients, according to the commission. According to the SEC, Ameriprise Advisors sent clients a text informing that Zima offered to guarantee 18.5 percent in returns for the first year after investment.

In August, a client asked Hoffman if he was receiving any compensation from Zima for his recommendations. Hoffman reportedly said he could only get a one percent commission on the assets he invested as an Amerirpise advisor. The client eventually invested over $350,000. According to the commission, Ameriprise barred Hoffman from making recommendations entirely.

Hoffman hid the plan from his employer by using a non-Ameriprise email account and giving the firm false information about the reasons for his outside business activities and wire transfers from his clients’ accounts.

At one point, Hoffman discovered that Ameriprise planned to contact two of its customers to ask about those suspicious wire transfers. He assured the clients not to tell the firm that he was the one who solicited business as per commission.

According to the SEC, by the time Salter and Caruso were arrested in 2020, Hoffman’s clients had more than $610,000 in principal with no return. Ameriprise fired Hoffman in May of that year, and FINRA banned him from the industry that same month for failing to “provide documents and information” requested by the regulator, As per their BrokerCheck Profile,

According to BrokerCheck, Hoffman had more than two decades in the industry, beginning with multi-year stints at Morgan Stanley and Merrill Lynch joining Ameriprise in 2016. In the same year, while Hoffman was working at Wedbush Securities, a client alleged that he churned out his account and invested his funds in risky securities and lied about the losses he suffered; Hoffman and Wedbush eventually settled for $329,500.

Hoffman did not admit or deny the SEC’s allegations, but agreed to a decision that includes a permanent injunction. The commission is also seeking a refund on wrongly earned profits, prejudice interest and additional civil penalties.

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