U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23587 / June 29, 2016
Securities and Exchange Commission v. Lee D. Weiss, et al., Civil Action No. 1:15-cv-13460 (D. Mass. filed Sept. 29, 2015)
SEC Obtains Final Judgment Against Investment Adviser Charged with Fraud
The Securities and Exchange Commission today announced that on June 20, 2016, the Honorable Judge Indira Talwani, U.S. District Judge for the District of Massachusetts, entered a final judgment against Lee D. Weiss and his firm, Family Endowment Partners LP (FEP), and relief defendants MIP Global Inc., Mosaic Enterprises Inc., Mosaic Investment Partners Inc., and Weiss Capital Real Estate Group LLC.
The final judgment permanently enjoins Weiss and FEP from violating the antifraud provisions of the federal securities laws and other provisions of the Investment Advisers Act of 1940. In addition, the final judgment orders Weiss and FEP to pay a civil penalty of $1,000,000 and $500,000 respectively, and orders Weiss, FEP, and the relief defendants to pay disgorgement totaling $8,436,766, plus applicable interest. Weiss, FEP, and the relief defendants consented to the judgment's entry without admitting or denying the allegations in the SEC's complaint. The court's entry of the final judgment ends the SEC's litigation in its entirety.
Today, in a related administrative proceeding, the SEC issued an order permanently barring Weiss from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization. The order provides a limited 180-day period for Weiss to transfer certain assets and to wind down certain funds, with periodic reporting obligations to the SEC on these activities. Weiss consented to the SEC's order without admitting or denying the findings of the SEC's order.
The SEC's complaint, filed on September 29, 2015 in federal court in Massachusetts, alleged that FEP and Weiss perpetrated multiple fraudulent schemes, and engaged in a pattern of self-dealing and failing to disclose material facts to clients regarding conflicts of interest, use of investor funds, and the risks of the investments they recommended. Specifically, the complaint alleged that FEP and Weiss urged their clients to invest more than $40 million in illiquid securities issued by several related companies without disclosing that Weiss had an ownership interest in the parent company of these entities and received payments from these entities. In addition, the complaint alleged that FEP and Weiss recommended that their clients invest in entities that Weiss owned and controlled without disclosing that the investments would be used primarily to benefit FEP. The complaint also alleged that FEP and Weiss advised clients to invest in a consumer loan portfolio while concealing that Weiss himself would secretly pocket half of the clients' profits from these investments.
The final judgment permanently enjoins Weiss and FEP from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Section 206 of the Advisers Act and Rules 206(4)-2 and 206(4)-8 thereunder. The final judgment also enjoins FEP from violating and Weiss from providing substantial assistance to violations of Section 204(a) of the Advisers Act and Rule 204-1 thereunder.
For further information on this action, please see Press Release No. 2015-218 (Sept. 29, 2015).