The Securities and Exchange Commission Thursday charged a 42-year-old New Jersey man who falsely claimed to be a registered investment advisor (RIA) with running a sham investment company for six years, defrauding at least 30 individual investors of $1.1 million.
William J. Wells, owner and principal of Promitor Capital Management LLC., told investors he was an RIA when he was not.
Wells, who was in fact registered with FINRA as an “investment company products/variable contracts representative” between April 4, 1997, and Oct. 2, 1998, passed the Series 6 exam. But he claimed on his investment fund overview that he was a Series 65 registered investment advisor, an example he never took, according to the SEC complaint in U.S. District Court.
Attempts to reach Wells, whose address is listed as River Vale, N.J., according to the SEC, were not unsuccessful and a defense attorney isn’t listed in court papers.
SEC officials also said Wells falsely claimed that he would invest funds in stocks through individualized accounts when he made “virtually no such stock investments” and never opened accounts for his clients.
Since 2012, Wells is accused of using as much as $319,000 in new money to repay earlier investors looking to withdraw assets from Promitor funds, the SEC also charged in legal documents filed in federal court.
Despite a rising market in the wake of the 2008 recession, Promitor funds suffered net investment losses every year since 2009, the year Promitor was founded, due to high-risk options trades. By the end of August, Promitor brokerage accounts held only $34.95, the SEC said.
“Wells also misappropriated at least some investor money for himself, depositing it in his own personal bank account,” the SEC also said.
Wells raised money from friends and colleagues in exchange for a fee of 2 percent of assets under management and 20 percent of profits above a threshold, according to court documents.
To hide his losses, Wells sent clients quarterly statements with bogus balances and when clients began to catch on late last year and demand that he liquidate their positions, Wells came up with excuses for delays.
“You running a Ponzi scheme?” a client texted Wells last March, according to court documents. “Why the heck is this going down like this?”
Wells would respond that investors were getting their money, and sometimes they did but it was never as much as Wells had promised, the SEC said.
On April 2, Wells finally admitted to an investor who had been asking since January for Wells to return his money that he had lied.
“My explanation is that I’m an idiot and was trying to get some big trades to hit,” Wells texted back in response. “To make you more money.”
SEC officials said they are seeking Wells to repay investors principal and interest and to pay a fine.