On July 6, the SEC charged New York-based Windham Securities with misappropriating investor funds. Windham's owner and principal Joshua Constantin and former managing director Brian Solomon were also charged.

The SEC alleges that Constantin and Solomon fraudulently induced investors into giving Windham $1.25mn for securities investments. The men lied to investors about Windham's investment expertise and return history. Instead of using the funds to purchase securities, the men misappropriated the funds and provided false assurances to cover their tracks.

Allegedly, the men recommended an opportunity in Leeward Group, Inc., a private company the men told investors Windham was helping take public. Constantin and Solomon raised $1.1mn for investments and $135,000 to cover fees and services. Constantin deposited about $668,000 in his private bank account and an outside business account, using the funds for his expenses and to pay Solomon. Constantin then used $450,000 of the funds to purchases Leeward securities in the name of Domestic Applications Corp., an entity he controlled and that the investors had no ownership interest in. Constantin and Solomon try to conceal the fraud by creating fake promissory notes and Windham account statements showing the investors' purchase of Leeward securities.

The SEC is seeking permanent injunctions, disgorgement of funds plus prejudgement interest, and penalties against Windham, Constantin and Solomon. [SEC, 7/7/11]