Securities Lawyers Blog
A well-known investment adviser, Mark F. Spangler (“Spangler”), was convicted by a federal jury of 32 criminal counts of wire fraud, money laundering and investment advisor fraud. He defrauded friends and family by diverting their investments into two-risky startup companies. U.S. Attorney Mark Durkan stated, “This defendant used his position of trust as a tool to cheat his clients out of money for their mortgages, their children and grandchildren’s education, their retirement and plans for charitable giving.”
Spangler’s illicit activity was uncovered after a FBI raid of his house in September 2011. While investors faced insurmountable losses, Spangler used their money to investment in startup companies and to live a life of luxury. At trial the evidence and witness testimony established that Spangler repeatedly violated his fiduciary duty as an investment adviser by misleading investors about where their money was invested. Spangler supplied investors with false quarterly statements with inflated values for their accounts. He told clients that their assets were valued at $73 million; however the actual value recovered was approximately $28 million. By falsifying account statements to clients, investors suffered a substantial loss of $45 million.
In certain situations, when an investor requested to liquidate accounts, Spangler paid out these investors with capital raised by new investors. The Ponzi scheme began to unravel as the private fund was unable to satisfy redemption requests. Eventually, the Spangler Group filed for receivership proceedings. Receivership occurs when a company cannot meet its financial obligations or enters into bankruptcy. The filing for receivership in state court by the Spangler Group was a red flag for the SEC and the U.S. Attorney’s Office.