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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22479 / September 13, 2012

Securities and Exchange Commission v. Deer Hill Financial Group, LLC, et al., Civil Action No. 12-01317 (District of Connecticut September 13, 2012)

SEC Charges Connecticut-Based Broker for Stealing Investor Funds

The Securities and Exchange Commission announced today that it has charged Stephen B. Blankenship, a resident of New Fairfield, Connecticut, and Deer Hill Financial Group, LLC, a Connecticut limited liability company under Blankenship’s control, with a scheme to defraud investors. The Commission’s Complaint alleges that, from at least 2002 through November 2011, Blankenship misappropriated at least $600,000 from at least 12 brokerage customers by falsely representing that he would invest their funds in securities through defendant Deer Hill.

The SEC alleges that until November 2011, Blankenship was a registered representative of Vanderbilt Securities, LLC, a registered broker-dealer based in Melville, New York. According to the complaint, Blankenship lied to his brokerage customers and in many instances, lured customers to withdraw money from their brokerage accounts with promises that they could obtain a greater rate of return by investing through Deer Hill. The complaint alleges that Blankenship assured his customers that he would invest their money in established securities such as publicly traded mutual funds. When customers requested account statements, Blankenship provided the customers with fictitious statements from Deer Hill that falsely represented that Blankenship had invested their money in a variety of investments.

According to the SEC’s Complaint, Blankenship never invested the customers’ money. Instead, Blankenship used the customers’ money for personal expenses, business expenses and to make Ponzi-like payments to other customers who requested a return of all or part of their investment.

The action was filed in federal court in Connecticut on September 13, 2012, and the Complaint alleges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The Commission also alleges that the defendants violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and Section 15(a) of the Exchange Act. In its action, the Commission seeks the entry of a permanent injunction against the defendants, disgorgement of ill-gotten gains by the defendants plus pre-judgment interest thereon, and the imposition of civil monetary penalties.

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. The SEC thanks the U.S. Attorney’s Office for the District of Connecticut, the Connecticut Department of Banking’s Securities Division, and the police department in Danbury, Conn., for their assistance in this matter. The Commission’s investigation is continuing.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2012/lr22479.htm


Modified: 09/13/2012