SEC Whacks Long Island Money Manager

BROOKLYN (CN) – Long Island money manager Warren Nadel and his two companies took more than $8 million in “illicit commissions and fees” from “a fraudulent investment program,” the SEC says. It sued Nadel, Warren D. Nadel & Co. and Registered Investment Advisers LLC in Federal Court.

     Nadel, 59, of Upper Brookville, took more than $6 million in commissions and at least $2.4 million in “advisory fees,” through misrepresentations and omissions, the SEC says. He claimed to buy and sell utilities securities in the open market.
     But according to the complaint: “Defendants’ conduct was fraudulent. In numerous communications with clients and prospective clients, defendants deliberately overstated the value and liquidity of client holdings in the strategy. They succeeded in doing so by concealing critical information about the way they were supposedly executing the strategy. For example, defendants informed clients repeatedly (orally and in writing) that they were executing open-market transactions on the clients’ behalf. The vast majority of transactions, however, were not executed on the open market. Most simply consisted of trades between advisory client accounts controlled by defendants at inflated prices made up by Nadel himself. By shuffling securities back and forth between advisory client accounts at inflated prices, defendants created the false impression that there was a liquid market for these securities and that the market prices for the securities were consistent with the inflated values that defendants reported to RIA clients. To further induce investors to join and stay in the
     Strategy, defendants also deliberately overstated (by more than twice) the amount of assets that RIA had under management.
     “By means of these misrepresentations and omissions, Defendants attracted and maintained RIA clients, and obtained from them, more than $6 million in commissions and at least $2.4 million in advisory fees during the relevant period. Meanwhile, RIA’s clients suffered substantial losses on what defendants had falsely represented to be a liquid, cash management program.” (Parentheses in complaint.)
     The SEC seeks disgorgement, penalties and an injunction.

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