The Securities and Exchange Commission has charged a former Next Financial registered representative and investment adviser in Altoona, Pennsylvania, with operating a long-running offering fraud.
The SEC’s complaint alleges that Douglas Simanski raised more than $3.9 million from approximately 27 of his brokerage customers and investment advisory clients, many of them retired or elderly, by telling them that he would invest their money in either a “tax free” fixed rate investment, a rental car company, or one of two coal mining companies in which he claimed to have an ownership interest.
Simanski allegedly told the investors to write checks payable to personal bank and brokerage accounts he opened in his wife’s name. The complaint alleges that instead of investing the money as he promised, he largely used the money to repay other investors and for his personal use.
According to the complaint, Simanski’s scheme collapsed when one of his clients contacted the Financial Industry Regulatory Authority and he admitted his scheme to his employer. He was affiliated with Next Financial for more than 15 years, and has 25 disclosures on his Brokercheck profile, most of them settled by the firm.
“This matter highlights the need for retail investors – and retirees and elderly individuals in particular – to remain skeptical of investments that sound too good to be true and confirm that investments recommended by brokers and investment advisers are approved for sale by their respective brokerage or advisory firms before transferring funds,” said Kelly Gibson, associate regional director for enforcement in the SEC’s Philadelphia Regional Office.
In a parallel action, the U.S. Attorney’s Office for the Western District of Pennsylvania announced that Simanski pleaded guilty to criminal charges.
The SEC charges Simanski with violating antifraud provisions of the federal securities laws. He has agreed to settle the charges against him, which is subject to court approval, orders injunctive relief and disgorgement of ill-gotten gains plus interest. Simanski also agreed to the entry of an SEC order that, when entered, will bar him from the securities industry for the rest of his life.