SEC Charges Connecticut Man with Defrauding Retail Investors

Litigation Release No. 24681 / December 5, 2019

Securities and Exchange Commission v. Lester Burroughs, Civil Action No. 3:19-cv-01913-VLB (D. Conn. filed December 4, 2019)

On December 4, 2019, the Securities and Exchange Commission charged a Connecticut investment adviser with misappropriating $560,000 from his advisory clients by selling fictitious financial products and using the proceeds to pay other advisory clients, as well as for his own use.

According to the SEC's complaint, filed in federal court in Connecticut, Lester W. Burroughs engaged in a scheme to defraud retail investors by misappropriating funds from one advisory client and then making Ponzi-like payments to the client using assets misappropriated from other advisory clients. Burroughs allegedly told certain advisory clients that he would invest their money in "Guaranteed Interest Contracts" (GIC) with guaranteed annual returns of 4% or 7%. The complaint alleges that Burroughs never invested his clients' money in GICs and that he instead misappropriated the funds and provided clients with fake account statements to hide his theft.

In a parallel action, the U.S. Attorney's Office for the District of Connecticut announced criminal charges against Burroughs.

The SEC's complaint charges Burroughs with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940 and seeks a permanent injunction from future violations of those provisions, disgorgement and prejudgment interest, and a civil monetary penalty.

The SEC's case is being handled by Robert Baker, Martin Healey, John McCann, and Lawrence Pisto of the SEC's Boston Regional Office. The SEC appreciates the assistance of the Federal Bureau of Investigation and U.S. Attorney's Office for the Southern District of Connecticut.

The SEC's Office of Investor Education and Advocacy has issued investor guidance on how senior citizens can protect themselves from fraud.