Home Alts News SEC Charges Advisory Firm and Executives with $75 Million Fraud

SEC Charges Advisory Firm and Executives with $75 Million Fraud

The Securities and Exchange Commission has charged two North Carolina-based executives, Gregory E. Lindberg and Christopher Herwig, and their registered investment adviser, Standard Advisory Services Limited, for defrauding clients.

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The Securities and Exchange Commission has charged two North Carolina-based executives, Gregory E. Lindberg and Christopher Herwig, and their registered investment adviser, Standard Advisory Services Limited, for defrauding clients out of more than $75 million through undisclosed transactions.

According to the SEC’s complaint, from July 2017 through 2018, Lindberg and Herwig, through Standard Advisory, breached their fiduciary duties to their advisory clients by fraudulently causing them to engage in undisclosed related-party transactions that were not in the best interest of their clients.

The SEC claims that the three defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21.4 million in advisory fees, which Lindberg allegedly “doled out” to himself and/or to his affiliated businesses. To conceal the alleged fraud, Lindberg purportedly “orchestrated the schemes” through complex investment structures and a web of affiliate companies, the SEC said.

In one example outlined in the SEC’s lawsuit, Lindberg and Herwig are accused of advising four North Carolina-based insurance companies owned by Lindberg to sell their interests in other Lindberg-affiliated special purpose vehicles and then re-purchase essentially the same investments through a different investment vehicle at a higher price. Lindberg allegedly pocketed the difference, which was more than $57 million.

From November 2017 through June 2018, Lindberg and Herwig caused the insurance companies to enter into 13 such transactions, the SEC said.

“Lindberg and Herwig used the fraudulent ‘profits’ to enrich Lindberg and to support his other businesses. All the while, the board members of the…insurance companies were left in the dark about Lindberg’s misappropriation,” the complaint stated.

According to the Associated Press, in August 2020, Lindberg was sentenced to more than seven years in prison for attempting to bribe North Carolina’s insurance commissioner. However, he was released from a minimum-security prison in Alabama last month after the 4th U.S. Circuit Court of Appeals overturned his convictions, declaring that the trial judge gave jurors misleading instructions prior to their deliberations. A new trial was ordered for March 2022.

The SEC seeks disgorgement plus prejudgment interest, penalties, and permanent injunctions.

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