U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23583 / June 24, 2016
United States v. Malcolm Segal, No. 2:15-cr-287 (E.D. Pa. filed June 25, 2015)
Securities and Exchange Commission v. Malcolm Segal, Civil Action No. 2:15-cv-3668 (E.D. Pa. filed July 1, 2015)
Former Pennsylvania Stockbroker Sentenced to 126 Months in Prison in Connection with Ponzi Scheme
The Securities and Exchange Commission announced that, on June 23, 2016, a federal court in Philadelphia, Pennsylvania, sentenced former stockbroker Malcolm Segal, of Langhorne, Pennsylvania, and Boynton Beach, Florida, to 126 months imprisonment followed by 3 years of supervised release. In addition, Segal was ordered to pay over $3 million in restitution. In July 2015, the U.S. Attorney's Office for the Eastern District of Pennsylvania announced an indictment charging Segal with mail fraud and wire fraud, and, in February 2016, Segal pleaded guilty.
The criminal charges against Segal arose out of the same fraudulent conduct alleged by the SEC in a civil securities fraud action filed against him. According to the SEC's complaint, filed in federal court in Philadelphia, Pennsylvania, Segal fraudulently sold certificates of deposit (CDs) to his brokerage retail customers falsely claiming that he could provide higher interest rates on these FDIC-insured CDs than otherwise available to the general public. The complaint alleges that, in some instances, Segal purchased CDs on behalf of investors but secretly redeemed them early and took the proceeds. Other times, the complaint alleges that Segal did not purchase CDs at all despite telling customers he had, and then misappropriated the customers' money. Besides spending investor money on himself (including to purchase a condominium in Florida and to pay for vacations), Segal allegedly used it in Ponzi scheme fashion to make purported interest payments and principal repayments to earlier investors. Eventually, the complaint alleges that Segal stole directly from his customers' brokerage accounts in a last-ditch effort to keep funding the Ponzi payments and keep his scheme from being detected. He allegedly forged letters of authorization to facilitate the transfer of customer funds to accounts he controlled, and in one case forged the signature of one customer's wife who had died before the date of the transfer. The complaint alleges that the scheme collapsed in July 2014.
Earlier this week, the district court in the SEC's case issued a final judgment against Segal, permanently enjoining him from future violations 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 and ordering him to pay disgorgement of over $3 million, which was deemed satisfied by entry of the criminal restitution order. The court's entry of the final judgment resolves the SEC's case against Segal. In April 2016, the SEC barred Segal from the securities industry.
For further information, see Litigation Release No. 23295 (July 1, 2015) and Exchange Act Release No. 77702 (Apr. 25, 2016).