Earlier this fall, the U.S. Securities and Exchange Commission (“SEC”) brought charges against Brenda Smith, a Philadelphia based investment adviser who allegedly ran a $105 million securities fraud. Smith was charged with four counts of wire fraud and one count of securities fraud.

According to the SEC complaint, Smith perpetrated a fraudulent scheme using her fund, Broad Reach Capital, from February 2016 to August 2019.  She raised more than $105 million in investment with false statements about the fund’s assets and performance and promising sophisticated trading strategies. She claimed that the fund never had a losing month and that investors could expect annualized returns of 30% or more.  In reality, Smith was misusing investor funds to pay back other investors and to pay her personal expenses.  For example, Smith allegedly used $2 million of assets from the fund to pay her American Express bill.

Things began to unravel for Smith last spring when several large investors in Broad-Reach Capital made redemption requests which she was unable to honor.  Smith gave investors false explanations as to why she could not pay the redemptions requests.  In July, FINRA barred Smith for failing to comply with document requests.  In late August, she was arrested in her Rittenhouse Square condo.  She is currently being held without bail in an Essex County, N.J. jail. The SEC has frozen her assets and bank accounts.

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If you believe that you have been misled by a financial advisor or wish to engage the services of an investment lawyer, please call the Costello Law Group at 410-832-800 (or Toll Free 877-418-0003) for a free consultation. Tom Costello of the Costello Law Group has 25 years of experience in stockbroker misconduct and investment fraud and represents investors nationwide.