MANHATTAN (CN) - The SEC on Tuesday filed an emergency enforcement action against a Schenectady investment adviser it accuses of lying to clients and stealing $2.7 million of the $8.8 million they handed over to him.
The SEC sued Scott Valente and his company, The Eliv Group, in Federal Court.
The 21-page lawsuit accuses Valente, 56, of a multitude of financial sins, including: "(1) falsely claiming to prospective clients that they have achieved consistent and outsized, positive returns; (2) falsely assuring prospective clients that their principal was 'guaranteed,' backed by a large money market fund and fully liquid; (3) falsely assuring existing clients by sending them monthly investment reports that reported phony and inflated monthly returns, and inflated assets under management (ranging from $11 million to $17 million) and client account values; and (4) falsely assuring prospective and existing clients that ELIV's books and records (including monthly statements) were audited." (Parentheses in complaint.)
The complaint continues: "In reality, defendants have earned no positive results at all, but rather have sustained investment losses in each of the three full years ELIV has existed, amounting in total to $1.2 million. Nor were any of their clients' funds 'guaranteed,' or backed by any money market funds. Far from being liquid, furthermore, the vast majority of ELIV's investments have been placed in speculative, highly illiquid investments in privately held companies. And Defendants' assurances that ELIV employed the services of an auditor were pure fiction."
In a statement announcing the lawsuit, the SEC added: "Meanwhile, Valente has been making substantial cash withdrawals of client funds and spending their money on his home improvements and mortgage payments as well as jewelry and a vacation condominium."
Valente's company had offices in Albany and Warwick, N.Y.
Valente lied about himself and his history, the SEC says in the complaint: "On his ELIV website, Valente has told the investing public (and he still does) that he has a 30-year record of investing experience 'dedicated to the highest standards of service,' and that he founded ELIV after leaving the 'corporate financial industry' upon concluding there 'had to be a better way for clients to achieve financial independence.' This too is false: In reality, and not disclosed to investors, Valente is a former registered representative who has twice filed for bankruptcy, and he founded ELIV after the Financial Industry Regulatory Authority ('FINRA') permanently expelled him in 2009 from the broker-dealer industry he had been employed with for 17 years, based on its findings (to which Valente consented, but neither admitted to nor denied) that Valente had engaged in serial misconduct against numerous customers." (Parentheses in complaint.)
Of the $8.8 million Valente schmoozed out of his clients, the SEC claims, he was entitled to no more than a management fee of 1 percent, or $88,000. However, the SEC claims, he "secretly misappropriated at least $2.66 million of his clients' money, spending the vast majority of it on his lavish lifestyle: home improvements, mortgage payments, jewelry, a vacation condominium, and substantial cash withdrawals."
The SEC seeks disgorgement, penalties, freezing of assets and an injunction.