[ by Larry Goldfarb ]

It's amazing that the same scenario continues to play out time after time.  A broker lures fellow parishioners or club members or neighbors to move their money out of investments that he may be managing at a large brokerage firm and to invest directly with him.  He promises greater returns and then the investors are shocked when their investments vanish in a flood of shady business practices.  Well that situation played out again last Friday when the SEC charged a broker and his Danbury, CT- based company with stealing at least $600K from parishioners.

The SEC alleges that:

• Stephen Blankenship lured about a dozen customers – including some retirees and others he met at church – into his scheme by transferring it to his firm, Deer Hill Financial Group.
• Blankenship claimed he was investing their money in established securities such as publicly-traded mutual funds.  But in reality he merely transferred customer money to his own bank account.  
• Blankenship made Ponzi-like payments to other customers who requested a return of all or part of their investment.

In a parallel action, the U.S. Attorney's Office for the District of Connecticut today announced criminal charges against Blankenship.

"Blankenship took advantage of fellow churchgoers and senior citizens who relied on their savings for retirement and placed their trust in him," said David Bergers, Director of the SEC's Boston Regional Office.  "He betrayed that trust by using their money to make personal credit card payments and home improvements."

According to the SEC's complaint filed in the U.S. District Court for the District of Connecticut, most of the investors deceived by Blankenship became his brokerage customers at Santa Monica-based Syndicated Capital and later at Melville, N.Y.-based Vanderbilt Securities.  Some had been his customers for as long as two decades.  The fraud began in 2002.

The SEC alleges that in order to conceal his scheme, Blankenship often created fake account statements that falsely represented that he had invested their money in a variety of investments.  The purported account statements were printed on Deer Hill letterhead and provided to customers.  In all instances, the investments described on the account statements did not exist.

The SEC's complaint alleges that Deer Hill and Blankenship violated the antifraud provisions of the federal securities laws and acted as unregistered brokers.  The complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, monetary penalties, and the entry of a permanent injunction against Deer Hill and Blankenship, who lives in New Fairfield, Conn.

Based on the same misconduct, the U.S. Attorney's Office for the District of Connecticut charged Blankenship with criminal violations.  The Connecticut Department of Banking's Securities Division has obtained, by consent, a revocation of Blankenship's registration and has barred Blankenship and Deer Hill from operating in Connecticut.  

For further details, go to:   [SEC PR 12-188, 9/7/12] and [SEC Complaint].