SEC Obtains Final Judgment Against Adviser Accused of Defrauding Clients and Pro Athletes
The Securities and Exchange Commission has obtained a final judgment against investment adviser Douglas Elstun of Lenexa, Kansas, who was charged with "repeatedly" defrauding and breaching his fiduciary duty to his advisory clients.
The Securities and Exchange Commission has obtained a final judgment against investment adviser Douglas Elstun of Lenexa, Kansas, who was charged with “repeatedly” defrauding and breaching his fiduciary duty to 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.
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 Kansas City Star reported earlier this year that Elstun’s 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.
The SEC’s complaint alleged that from 2015 through 2018, Elstun charging higher advisory fees than clients had agreed to pay. He was 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 alleged 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 alleged 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 claims 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 was also accused of directing his Crossroads administrative employees to fabricate advisory agreements with phony fee percentages, which he then produced to the SEC.
Without admitting or denying the SEC’s allegations, Elstun was ordered to pay $386,647 in disgorgement, $64,338 in prejudgment interest, and a $390,000 civil penalty.
