SEC punish thieving investment advisor

From July 2007 to September 2018, investment advisor Dennis Gibb, the founder and sole owner of registered investment adviser Sweetwater Investments, Inc. stole more than $3 million from a private fund the firm managed called Sweetwater Income Flood LP.

To hide his theft and induce investors to put even more money into the fund, Gibb created and sent out false account statements and tax documents inflated to include gains that might have been realized if Gibb had not been stealing the funds that were to be invested. Rather than real statements showing the fund only held $1.8 million, Gibbs reported that his Income Flood fund had $7.8 million in assets. And then to underscore the veracity of his claims, Gibb falsely reported fake assets under management in the Forms ADV filed with the Commission, and falsely claimed the fund had been audited by an independent auditor. From July 2007 to September 2018, investment advisor Dennis Gibb, the founder and sole owner of registered investment adviser Sweetwater Investments, Inc. stole more than $3 million from a private fund the firm managed called Sweetwater Income Flood LP.

Found out in a SEC exam

The SEC’s San Francisco Office of Compliance Inspections and Examinations uncovered Gibb’s fraud during its 2018 exam. The Commission revoked Gibb’s registration and any remaining assets will be liquidated and placed in a fund for distribution to harmed investors.

Gibb started soliciting investors for Income Flood in 2007 and formed the entity in 2008. He marketed the fund to investors – many of whom were planning to rely on the fund for their rapidly approaching retirements – by claiming that it would write specific put and call option contracts on the same underlying security, and invest in government bonds, to produce stable, consistent returns.

Approximately 20 investors invested a total of about $7.3 million in Gibb’s fund. At the same time, Gibb secretly transferred $3,137,153 from the fund’s brokerage accounts to bank accounts belonging to Sweetwater. Like most of his ilk, Gibb spent the money on personal expenses, including his mortgage and car payments, as well as on Sweetwater’s business expenses.

Gibb knew when he made the transfers that he was stealing the money – taking more than would have been due to him through Sweetwater management fees. To hide his theft and convince investors to put even more money into the fund, he sent fraudulent account statements and tax documents to investors. Gibb also falsely reported in SEC filings that Sweetwater had over a billion dollars in assets under management, when it really had only $73 million.

Where’s the money now?

Good question. Erin Schneider, Associate Director for the SEC’s San Francisco Regional Office says “remaining funds will be preserved and returned to harmed investors.” Whatever is left, of course. In the meantime, Gibb is barred from the industry and association with any broker, dealer, investment advisor, municipal securities dealer, etc. In a parallel action, the U.S. Attorney’s Office for the Western District of Washington says that Gibb also has pleaded guilty to criminal charges.

Where were compliance and oversight?

Nowhere to be found. One cannot stop investors from investing in opportunities that are much too good to be true. But one can help firms interested in compliance remain compliant. That’s where Patrina can help. We’ve built our business based on helping organizations keep track of “bad apples,” and 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, designated third-party services, our 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.