U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21715 / October 29, 2010
Securities and Exchange Commission v. Steven Brewer, Adam Erickson, Brewer Investment Group, LLC, Brewer Financial Services, LLC, and Brewer Investment Advisors, LLC, Case 10-cv-06932 (BMM) (N.D. Ill.)
SEC Obtains Asset Freeze and Preliminary Injunctions to Halt Offering Fraud by Chicago-Based Broker-Dealer and Investment Adviser
The Securities and Exchange Commission announced that, on October 28, 2010, it filed a civil action in the United States District Court for the Northern District of Illinois, Eastern Division, against Brewer Financial Services, LLC ("BFS"), a registered broker-dealer, Brewer Investment Advisors, LLC ("BIA"), a registered investment adviser, Brewer Investment Group, LLC ("BIG"), their parent holding company, and their managing principals/officers, Steven Brewer and Adam Erickson, for allegedly participating in a fraudulent offering of promissory notes. BFS, BIA, and BIG are based in, and Brewer and Erickson reside in, Chicago, Illinois.
The Complaint alleges that, from June 2009 through at least September 2010, the defendants raised approximately $5.6 million from 74 investors who invested in promissory notes issued by an Isle of Man company. Although investors were told that their money would be used to repay certain debts of the issuer's parent company, and thereby release assets that would be used to secure their promissory note obligations, the Complaint alleges that nearly all of the offering proceeds were transferred to BIG and its subsidiaries. According to the Complaint, in addition to misrepresenting the manner in which the offering proceeds would be used, the defendants failed to tell investors that BIG and its subsidiaries were in a precarious financial state. In addition to sustaining substantial operating losses from the inception of the offering through the present, BIG had failed to make required interest payments to investors by July 1, 2010, and had failed to meet its own payroll obligations by August 2010. The Complaint alleges that, notwithstanding, and without disclosing, this material information, the defendants continued selling promissory notes to new investors for at least three additional months. According to the Complaint, the note offerings were not registered with the Commission.
The Complaint claims that, based on this conduct, all of the defendants violated Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder. The Complaint also claims that BFS violated, and Brewer and Erickson aided and abetted the violation of, Exchange Act Section 15(c), and that BIA violated, and Brewer and Erickson aided and abetted the violation, Sections 206(1) and 206(2) of the Investment Advisers Act. On the Commission's motion, and upon the consent of all defendants, the Court issued Preliminary Injunctions and an Order Imposing Asset Freeze and Other Ancillary Relief ("Order") on October 29, 2010. Among other things, the Court's Order froze certain bank accounts of defendants BIG and BFS.
The Commission acknowledges the assistance of FINRA in this matter.
See Also: SEC Complaint