Adviser Stole From Old People, SEC Says

DENVER (CN) - Colorado investment adviser Gary Snisky stole nearly $3 million from his clients, many of them elderly, selling them memberships in his company Arete, which means Christian love, the SEC claims in court.

Snisky, 46, of Longmont, hired salesmen to push his Arete offering on old-timers, and swiped $2.8 million of the $3.8 million they managed to sell, the SEC says in its federal lawsuit.

"With one hand Snisky ushered investors into a supposedly safe investment opportunity with guaranteed profits, and with the other hand he put investors' money into his own pocket," the SEC's Denver region director said in a statement.

Federal prosecutors filed parallel criminal charges.

"From August 2011 through January 2013, Snisky fraudulently raised at least $3.8 million from more than 40 investors in Colorado and seven other states through the sale of membership interests in Arete and other related funds," the SEC said in its lawsuit.

"Primarily targeting annuity holders, Snisky used insurance agents to conduct his offering. At Snisky's direction, these salespeople solicited mostly elderly annuity-holding clients to purchase Arete, a purportedly safe and more profitable alternative to an annuity, in which investors could supposedly enjoy the same consistent, no-risk returns as most annuities while also having the ability to withdraw the interest earned and principal of the investment after ten years without penalty.

"Investors were told that their investment in Arete would provide a guaranteed annual return of 6% or 7%; a 10% bonus would be paid to compensate for any annuity withdrawal penalties; their funds would be used to purchase 'agency' bonds backed by the 'full faith and credit' of the United States Government; and Snisky, as an 'institutional trader,' would use these bonds to engage in overnight banking sweeps.

"These representations, however, were false. Snisky did not purchase any agency bonds, nor did he ever engage in any overnight banking sweeps. Instead, Snisky misappropriated approximately $2.8 million of investor funds, mostly through cash withdrawals. He used these funds to pay commissions to his salespeople, make payments on his personal mortgage, and otherwise for his own personal benefit."

The SEC seeks disgorgement, an injunction and penalties.

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