[ By Howard Haykin ] The SEC Thursday, charged Seattle-based IA and his firm with defrauding clients by secretly investing their money in 2 risky start-up companies he co-founded.  The adviser, who is a former chairman of the National Association of Personal Financial Advisors ("NAPFA"), allegedly funneled some $48 million of client money into these private ventures despite having represented that he would invest primarily in publicly-traded securities. The SEC's complaint against advisor, Mark Spangler, 57, was filed in federal court in Seattle.  The U.S. Attorney’s Office for the Western District of Washington announced parallel criminal charges against the adviser. SEC Findings and Allegations. Mark Spangler, who currently is bankrupt, is alleged  have raised over $56 million from his clients since 1998 for several private investment funds he managed.  Spangler is believed to have conducted the fraud from at least 2003 to 2011. Beginning in 2003, without notifying investors in the funds, Spangler and his advisory firm, The Spangler Group, began diverting the majority of client money into 2 private technology companies he created.  One company received nearly $42mn before shutting down operations.  It had long been a cash-poor company with a history of net losses, generating less than $100,000 in revenue during its 11-year history.  All told, by 2011, the 2 companies had received funding of about $48mn. Nevertheless, Spangler had a soft spot for the company and he continued to treat the investment funds as a piggy bank, even though such a risky investment was inconsistent with the investment strategies that Spangler promised his clients and contrary to their investment objectives. It's further alleged that Spangler did not tell investors that his advisory company, The Spangler Group, collected fees for “financial and operational support” from these companies, which were essentially paying these fees with the client money they had received from the funds.  From at least 2005 through April 2011, Spangler and his advisory firm took in $830,000 in fees for "financial and operational support" (not acutally rendered) from the 2 companies.  This amounted to "double-dipping" because the advisory company also was receiving management fees collected from clients  (say $56 million in assets under management, with 1% fee per annum, would yield $560K). Concealment. For years, Spangler successfully concealed his diversion of client funds, disclosing it only after he placed the advisory firm and the funds he managed into state court receivership in 2011.  All the customers were told throughout the 9 or so years, was that their funds were invested in Private Funds labeled "SV7", "SV9", "SV11", "TeraHop", or "Tamarac".  It's odd that Spangler never disclosed the underlying investments, nor that customers ever inquired - though at least 2 or 3 did so near the very end. SEC Charges. Spangler and TSG are charged with violating, among other things, the antifraud provisions of the '34 Securities Exchange Act and the 1940 Advisers Act.  The SEC seeks to collect disgorgement with prejudgment interest, and financial penalties from Spangler. SEC SF Office Staff Credits. Investigation conducted by Karen Kreuzkamp and Robert Leach, assisted by Michael Tomars, Peter Bloom, and Christine Pelham.  Robert Tashjian will lead the litigation. For further details, go to:   [SEC PR 12-95, 5/17/12] and   [SEC Complaint].