SEC Charges New Jersey Fund Manager With Securities Fraud

The Securities and Exchange Commission today charged a New Jersey fund manager and his firm with defrauding investors by lying about his credentials, concealing trading losses, and using investor funds to make Ponzi-like payments to other investors.

The SEC’s complaint filed in federal court in Manhattan alleges that William J. Wells, of River Vale, New Jersey, falsely told some investors that he was a registered investment adviser and would invest their money in specific stocks.  Instead, Wells and his firm, Promitor Capital Management LLC, are alleged to have invested mainly in high-risk options with poor results that Wells concealed with phony investor account statements that grossly inflated performance.  Wells further attempted to hide the losses by using funds from new investors to make Ponzi-like payments to earlier investors, the complaint alleges.  Wells allegedly raised more than $1.1 million from dozens of investors since 2009, but by late summer, the Promitor fund brokerage accounts held less than $35, with the rest dissipated by trading losses and Ponzi-like payments, or diverted into Wells’s personal bank account, the complaint alleges.

According to the complaint, when one investor was unable to get Wells to return a portion of his investment, he asked Wells by text, “You running Ponzi scheme?  Why the heck is this going down like this.”  Wells later responded by text saying, “My explanation is that I’m an idiot and was trying to get some big trades to. . . make you more money.”

“We allege that Wells lied to investors about the trades he made and created fake account statements showing positive returns to attract additional investments,” said Andrew M. Calamari, Director of the New York Regional Office.  “When his losses mounted, as alleged in the complaint, Wells stole funds from new investors to pay back old investors in classic Ponzi-like fashion.”

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today announced criminal charges against Wells.

The SEC’s complaint alleges that Wells and Promitor violated antifraud provisions of the federal securities laws and SEC antifraud rules.  Wells also was charged with aiding and abetting liability and control person liability for Promitor’s alleged violations.  The SEC is seeking permanent injunctions and financial penalties against Wells and Promitor, and return of allegedly ill-gotten gains with prejudgment interest.

The SEC’s investigation, which is continuing, has been conducted by Hane L. Kim, Jennifer K. Vakiener, Sandra Yanez, and Steven G. Rawlings of the New York Office.  The SEC’s litigation against Wells and Promitor will be led by Jack Kaufman, Ms. Kim, and Ms. Vakiener.  The case is being supervised by Sanjay Wadhwa.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York and the Federal Bureau of Investigation