Unregistered Broker’s Assets Frozen by SEC

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Unregistered Broker’s Assets Frozen by SEC

In a complaint unsealed just last week, the Securities and Exchange Commission (SEC) charged Justin Robert King and his advisory firm Elevate Investments, LLC with ongoing offering fraud that raised at least $7.4 million from investors. Why fraud? Because no such legal entity as Elevate exists. In reality, investor money was held in brokerage and bank accounts in the names of King, his wife Shannon King, and Elevate.


Misleading marketing statements

In the vein of “if it sounds too good to be true…,” King and Elevate are alleged to have made materially false and misleading statements on Elevate’s publicly-accessible website. Among those statements were notes that King’s trading historically generated profits for clients year after year, including a 61% return for all of his clients’ accounts from June 2019 through June 2020.


Moreover, Elevate’s website also listed a number of “trusted providers,” including broker-dealers TD Ameritrade and Interactive Brokers. However, TD Ameritrade closed King’s and Elevate’s accounts in July and August 2020, respectively, and neither King nor Elevate ever had accounts with Interactive Brokers.


Surprise, surprise: All of King’s trading, across all associated accounts, resulted in substantial losses year after year. And, the defendants were further looting the Fund’s assets. From September through November 2020 alone, King and Elevate raised $1.87 million from investors and suffered trading losses of $532,232. During the same period, King also transferred $298,000 to Relief Defendant Sharon King’s bank account, followed by another $100,000 transfer to her account on December 1, 2020.


SEC freezes assets and seeks a TRO


To stop Elevate and King from wreaking further mayhem, the SEC sought a Temporary Restraining Order (TRO) prohibiting King and Elevate from violating antifraud provisions of federal securities laws, and order the defendants’ assets frozen, and prohibiting the destruction of documents. Additionally, the SEC has requested accounting and a temporary receiver placed over Elevate.


Who is King?

King is a 40-year-old resident of San Juan Capistrano, CA. Prior to forming Elevate, he traded securities for at least one other pooled investment vehicle and three other clients. King also ran an auto glass replacement company. He never held any securities licenses, been registered with the SEC in any capacity, or associated with a registered broker-dealer or investment adviser.


Adding insult to injury, King was twice charged with felony heroin possession in two separate incidences in 2012. In 2013, he pled guilty to two felony accounts of narcotic drug possession and was sentenced to three years’ probation. He also was found guilty of felony assault in 2004 and found guilty of felony possession of marijuana with intent to deliver and money laundering in 2002.

It doesn’t get any better than that.


Elevate Investments LLC also has a murky history. With its principal place of business reported to be Sheridan, WY, the entity filed a Form D with the SEC on August 15, 2020, for a $100 million securities offering exempt from registration under Securities Act Rule 506(c).


Historic losses

From June 2019 through June 2020, King and Elevate managed five brokerage accounts in their own names and those of affiliates and/or clients. The accounts engaged primarily in short-term options trading. However, as previously mentioned, contrary to the web-touted 61% return, King’s trading resulted in realized losses in every account, totaling more than $3.8 million.


Where was compliance?

What compliance? Why would an unregistered advisory firm even bother with the formalities? King and his shadow company were bad actors. Period. End of story. But that’s not you or your company. That’s why compliance professionals like you and your team rely on the cloud-based compliance solutions Patrina delivers. For more than 25 years, Patrina has been helping compliance professionals like you 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, comprehensive, 8-module compliance solution, compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered. Let’s talk.