SEC bars NY broker for $8 million investment scam

Although it’s been attributed to the great showman PT Barnum, it was actually a banker named David Hannum who likely coined the phrase, “There’s a sucker born every minute.” And indeed, it seems to be true.

Most recent example is the the Securities and Exchange Commission’s (SEC) pre-Memorial Day case: 2:18-cv-03150) filed against Steven Pagartanis filed in the US District Court, Eastern District of New York alleging that the former registered representative defrauded longstanding brokerage customers in an $8 million investment scam.

Are all Ponzi schemes the same?

Why fix it if it ain’t broke? Following the time-honored scamming script, Pagartanis, who was affiliated with several commission-registered firms, defrauded at least nine, mostly retired, retail investors of approximately $8 million using false and misleading statements from 2013 until early 2018. Contrary to his promises that he would make safe investments that would yield monthly return payments, Pagartanis made… no investments…ever.

Rather he deposited investor funds into a host of bank accounts he controlled and then (no surprise!), used the funds for his personal benefit and to make monthly return to investors in a Ponzi-scheme-like fashion. The 58-year-old Pagartanis is a resident of East Setauket, NY and most recently (September 2017-March 2018) was a registered rep of Lombard Securities Incorporated, an SEC-registered broker-dealer.

What did he do with the money?

The usual. Pagartanis told some clients that their investment had a guaranteed repayment of principal with a fixed percentage return of between 4.5 and 8 percent annually. Others were told that they were investing in the common stock of a Canadian Land development and home-building company (Genesis Land Development Co., whose stock is listed on the Toronto Stock Exchange.  Others were told he was sinking their money into a land development company.

Where did investors’ money go?

Pagartanis transferred the money he raised to his personal bank account and to other entities he controlled. He used approximately $1.8 million to make monthly interest payments to investors. The rest went to…personal expenses. By the end of February, the investment account of $8 million had a balance of $8,000.

Where was compliance?

Well…someone did raise a red flag. But mostly because at some point, Pagartanis stopped making interest payments. Investors complained. Pagartanis has been barred. And compliance, of course, has been alerted. But what if there were processes, processes, procedures, and oversight in place to pre-empt bad practices? That’s where Patrina can help. We’ve built a business on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So, let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.