SEC Obtains Final Judgment Against Former Investment Adviser Charged with Defrauding Clients

Lit. Release No. 24764 / March 11, 2020

Securities and Exchange Commission v. E. Herbert Hafen, Civil Action No. 19-civ-8234 (S.D. N.Y., filed September 4, 2019)

The Securities and Exchange Commission announced today the entry of a final consent judgment against Connecticut resident E. Herbert Hafen, a former investment adviser at large financial institutions who was charged with misappropriating client funds.

On September 4, 2019, the Commission filed a complaint in the United States District Court for the Southern District of New York charging Hafen with securities fraud for defrauding his advisory clients by promoting a fraudulent investment opportunity. According to the complaint, Hafen instructed his clients to withdraw their money from the financial institution where Hafen worked, including liquidating stock holdings and personal retirement accounts, deposit that money into their personal bank accounts, and then transfer or wire the money to Hafen's personal bank account. The complaint further alleges that, once Hafen received his clients' money, he did not invest it as promised, but instead used it for his own personal purposes, including paying house, car, and credit card expenses for himself and family members.

The Court entered a final judgment against Hafen based upon his consent to resolve all claims. The final judgment enjoins Hafen from violating the antifraud provisions of 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 Commission has also entered an order barring Hafen from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock.

In a parallel action, the U.S. Attorney's Office for the Southern District of New York filed criminal charges against Hafen, who agreed to plead guilty to the criminal charges. Hafen was sentenced on February 4, 2020, to 30 months in prison. He was also ordered to pay restitution of $745,000 and forfeit $806,750.

The SEC's case was handled by Eric M. Brooks, Patrick J. Noone, Rachel E. Hershfang, and Kevin B. Currid of the Boston Regional Office. The SEC appreciates the assistance of the U.S. Attorney's Office for the Southern District of New York and the FBI.