SEC Obtains Judgment Against Investment Adviser for Defrauding Clients
Litigation Release No. 24120 / April 23, 2018
Securities and Exchange Commission v. Scott Newsholme, Civil Action No. 3:17-cv-06813 (D.N.J. filed Sept. 6, 2017)
A federal district court entered a judgment on April 13, 2018 against Scott Newsholme, a New Jersey-based tax preparer and investment adviser for defrauding his clients of more than $1 million to support his lifestyle and gambling habit.
In its complaint, filed on September 6, 2017 in federal district court in Trenton, New Jersey, the SEC alleged that Newsholme, of Farmingdale, New Jersey, fabricated account statements, doctored stock certificates, and forged promissory notes as part of a scheme in which he convinced clients seeking his financial planning advice to give him their money to invest in various securities. Instead of investing clients' money, Newsholme allegedly cashed their investment checks at a check-cashing store and pocketed the funds while assuring clients that their assets were safe and flourishing. The complaint further alleged that Newsholme made Ponzi-like payments to certain investors who asked about their investments and he used investor money for his own purposes, including to gamble and to pay personal expenses.
Newsholme consented to the entry of a judgment permanently enjoining him 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 Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The judgment orders Newsholme to pay disgorgement, prejudgment interest, and a civil penalty in amounts to be determined at a later date upon motion of the Commission.
On April 11, 2018, in a parallel criminal action, United States v. Scott Newsholme, 17-5015 (TJB), Newsholme pled guilty to wire fraud in violation of 18 U.S.C. §1343, aggravated identity theft in violation of 18 U.S.C. § 1028A, and aiding and abetting the filing of false tax returns in violation of 18 U.S.C. § 7206(2).