Home Alts News SEC Charges Adviser with Defrauding Advisory Clients and Pro Athletes

SEC Charges Adviser with Defrauding Advisory Clients and Pro Athletes

The Securities and Exchange Commission has charged Douglas E. Elstun of Lenexa, Kansas, an investment adviser, for allegedly “repeatedly” defrauding his advisory clients.

The Securities and Exchange Commission has charged Douglas E. Elstun of Lenexa, Kansas, an investment adviser, with allegedly “repeatedly” defrauding his advisory clients, including some professional athletes, by charging improper fees totaling more than $360,000 and trading in high-risk investments that lost his clients millions of dollars.

The Kansas City Star reported that his clients included Will Shields, former guard for the Kansas City Chiefs, Darren Sproles, retired running back from the Philadelphia Eagles, and Paul George of the Los Angeles Clippers.

Elstun was the owner of registered investment adviser, Crossroads Financial Management Inc., which closed in 2019 after 25 years in operation. He was dually registered as a broker at FSC Securities from 1996 until 2002, and at Sigma Financial from 2002 until 2012.

The SEC’s complaint alleges that from 2015 through 2018, Elstun charging higher advisory fees than clients had agreed to pay. He is also accused of applying the advisory fee to non-advisory assets, including bank account balances, equity in homes and other real estate, and the value of vehicles.

The SEC’s complaint also alleges that Elstun misled advisory clients about his trading in high risk, daily leveraged and/or inverse exchange-traded funds by failing to disclose the risks of buying and holding these products. The SEC claims that he inaccurately represented that the products functioned as “insurance” or a “hedge” for their portfolios, when his strategy actually created risk for clients.

The SEC said that his unsuitable purchases of these daily leveraged and inverse ETFs, and his sustained buy and hold strategy, resulted in his clients losing millions of dollars. He is also accused of directing his Crossroads administrative employees to fabricate advisory agreements with phony fee percentages, which he then produced to the SEC.

The SEC’s complaint, filed in federal court in the Western District of Missouri, charges Elstun with violating the antifraud provisions of various federal securities laws. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and civil penalties.

Click here to visit The DI Wire directory page.