SEC Charges Investment Club Manager for Misappropriating Investor Funds
Litigation Release No. 25625 / January 24, 2023
Securities and Exchange Commission v. Austin D. Ellison-Meade, No. 2:23-cv-00521 (C.D. Cal. filed January 24, 2023)
The Securities and Exchange Commission filed fraud charges against Austin D. Ellison-Meade, alleging that he fraudulently raised millions of dollars from investors in an investment club he managed called Baycap.io. According to the SEC complaint, Meade falsely claimed that Baycap.io's trading strategy was based on a proprietary algorithm Meade developed that could accurately predict stocks that were poised for growth.
The SEC's complaint alleges that from at least 2019 through 2021, Meade raised at least $2.8 million for Baycap.io from approximately 31 individual investors based on representations that he would use the funds to engage in algorithmic securities trading and that the funds would be readily available upon request. The SEC complaint further alleges that Meade never used investor funds to trade securities, but rather misappropriated money from Baycap.io to pay for personal expenses like luxury automobiles and make Ponzi-like payments. According to the complaint, Meade distributed fake account statements to cover up his fraud and to persuade investors to remain invested in Baycap.io. In addition, the complaint alleges that, contrary to Meade's representations, most Baycap.io investors were unable to withdraw their money upon request, with Meade offering a variety of excuses to explain why he was unable to access the funds. According to the SEC complaint, Meade charged Baycap.io investors a 2% fee upfront based on the amount of capital they invested and a 20% quarterly fee on any profits he generated for them.
The SEC's complaint, which was filed in the Central District of California, charges Meade with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charges Meade with violating Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint seeks permanent and conduct-based injunctions, disgorgement, and civil penalties against Meade.
In a parallel action filed earlier, the U.S. Attorney's Office for the Central District of California indicted Meade on seven counts of criminal wire fraud and identity theft.
The SEC's investigation was conducted by DoHoang T. Duong, Dora Zaldivar, and Finola H. Manvelian of the Los Angeles Regional Office. Gary Y. Leung will lead the litigation. The SEC appreciates the assistance of the U.S. Attorney's Office for the Central District of California and the FBI.