Connecticut Advisor Who Scammed Clients Out Of $1.6M Settles Charges

A Connecticut man who defrauded multiple retail clients out of $1.6 million in assets settled his final set of charges today on his way to prison.

The Securities and Exchange Commission secured a final judgement against E. Herbert Hafen on securities fraud charges filed Sept. 4, 2019. Hafen pleaded guilty last month to criminal charges brought by the U.S. Attorney's Office for the Southern District of New York.

Hafen was sentenced on Feb. 4 to 30 months in prison. He was also ordered to pay restitution of $745,000 and forfeit $806,750.

According to the SEC complaint, from 2011 through 2018, Hafen, while employed as a New York City-based registered representative and investment adviser at large financial institutions, cooked up a scheme to leverage his high-profile jobs to scam investors.

The complaint alleges that Hafen convinced his clients that he had access to an investment opportunity separate from those offered by the financial institution at which he worked, and this opportunity would pay an annual 6% return.

Hafen instructed his clients to withdraw their money from the financial institution where Hafen worked, including liquidating stock holdings and personal retirement accounts, deposit that money into their personal bank accounts, and then transfer or wire the money to Hafen's personal bank account.

The complaint further alleges that, once Hafen received his clients' money, he did not invest it as promised, but instead used it for his own personal purposes, including paying house, car, and credit card expenses for himself and family members.

"While some of the victims received some or all of their money back, most of the money was never repaid," the complain stated. "During the seven-year scheme, Hafen took more than $1.6 million from 11 victims. Of the total $1.6 million, Hafen has returned approximately $650,000."

The SEC's final judgement is based on Hafen resolving all claims. He is also barred from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.

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