SEC Charges San Diego-Based Investment Adviser with Running a Ponzi Scheme
Litigation Release No. 24461 / April 26, 2019
Securities and Exchange Commission v. Christopher D. Dougherty, et al., No. 3:19-cv-00769-JLS-KSC (S.D. Cal. filed April 26, 2019)
On April 26, 2019, the Securities and Exchange Commission charged Christopher D. Dougherty and several entities he controlled, with operating a Ponzi scheme that defrauded his investment advisory clients out of $7 million. The San Diego District Attorney's Office separately announced criminal charges related to the same conduct.
The SEC alleges that Dougherty provided investment advice to school district employees, hospital employees, veterans, and neighbors, most of whom were unsophisticated investors and trusted Dougherty completely. According to the SEC's complaint, Dougherty had his own California-registered investment advisor, C&D Professional Services, Inc. (dba C&N Wealth Management) ("C&D"), and through C&D, offered clients the opportunity to invest in tax-free "private placements" that purportedly provided quarterly dividends of about 5%. The complaint alleges that, in reality, there were no private placements. Dougherty was simply running a Ponzi scheme by taking new investor money and using it to pay quarterly dividends to existing investors and his personal expenses. According to the complaint, Dougherty also offered investors the opportunity to invest in his farm - JTA Farm Enterprises, LLC ("JTA Farm"), and his real estate business - JTA Real Estate Holdings, LLC ("JTA Real Estate"), but investor funds in these ventures were commingled with the C&D investments and used as part of the Ponzi scheme fraud as well. Dougherty and his wife filed for personal bankruptcy in October 2018.
The SEC's complaint charges Dougherty, C&D, JTA Farm, and JTA Real Estate with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act, and charges Dougherty and C&D with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. It also seeks relief including permanent injunctions, disgorgement of ill-gotten gains plus interest, and civil penalties.
The SEC's investigation was conducted by Sara Kalin and Maria Rodriguez of the Los Angeles Regional Office, with assistance from bankruptcy counsel, Neal Jacobson, of the New York Regional Office. The case is being supervised by Marc Blau and the litigation will be led by Amy Jane Longo. The SEC appreciates the assistance of the California Department of Insurance, the Office of the United States Trustee, the San Diego County Sheriff's Department, the San Diego District Attorney's Office, and the San Diego Police Department.