Former financial advisor Anthony Diaz has been found guilty on 11 counts of criminal fraud.
Diaz, an advisor since 2000, was registered with 11 different financial investment firms between then and 2015, when he was barred by FINRA from acting as a broker. His last employer was IBN Financial Services. He had been terminated from or permitted to resign by six of the 11 firms for a variety of reasons, including unauthorized trading and customer complaints. He last operated an office called Financial Planners Group of America located in Monroe County, Pa.
The next step is for judge Malachy E. Mannion of the U.S. District Court for the Middle District of Pennsylvania to sentence Diaz, but no date for the sentencing has yet been set, said court spokeswoman Dawn Clark. He faces a maximum sentence of 20 years in prison for each count.
Diaz was charged in an indictment in May 2016 by U.S. Attorney David J. Freed as having devised a “scheme and artifice to defraud and to obtain money and property, by means of materially false and fraudulent pretenses, representations and promises.” Specifically, he sold alternative investment products that were high risk, speculative and illiquid to his securities clients. Many of them had holding periods anticipated to be as long as nine years and the investments were sold in direct violation of state suitability requirements related to net worth, liquid net worth and income.
To sell the investments, he had clients sign blank documents or partially completed documents to which he added information that falsely represented his clients’ net worth, income, risk tolerance and investment experience to meet state Department of Banking and Securities guidelines. He was then found guilty of failing to explain to clients that the investments lacked liquidity and had no public market for resale. He told clients that the investments wouldn’t lose money and were “guaranteed” to earn a certain rate of return, according to the indictment.
Diaz then lied to his clients about their ability to withdraw funds from the investments, about his termination from the six firms, and he earned substantial commissions—over $1.5 million per year—on the sales of the investment products. His case has been working its way through the courts since 2016.
In 2015, Diaz sold his book of business to Perry “King Perry” Santillo Jr., who was brought up on federal charges in the same court as well as the U.S. District Court for the Western District of New York in October 2019 for operating a Ponzi scheme. Santillo pleaded guilty to all charges and is awaiting sentencing. According to Barbara Burns, a spokeswoman for the U.S. District Court for the Western District of New York in Buffalo, Santillo is expected to be sentenced at some point in March, though the date has not yet been set.
Darren Gelber, Diaz’s counsel, told WealthManagement.com that his client was “very surprised” and “devastated” by the verdict, and that the prosecution was “a rare type” because Diaz was not charged with stealing funds. “This ought to send a warning message to brokers that disclosures may not protect them,” Gelber said, when giving investment advice.