A Maple Grove, Minn.-based former investment advisor defrauded at least 23 of his clients out of more than $2.25 million over a period of years, according to charges filed in federal court Monday.
The Minnesota U.S. Attorney’s Office filed a criminal charge against Isaiah L. Goodman, the head of Becoming Financial Advisory Services, a former registered investment advisory in Minneapolis. In a parallel action, the Securities and Exchange Commission also charged Goodman.
According to the Justice Department, Goodman told his clients he’d provide financial planning and investment advice. The SEC complaint asserts that Goodman’s firm touted “long-term trading” as its investment strategy.
“Goodman generally represented to his clients that he would invest their money in securities, including mutual funds and stocks for their retirement and investment accounts, and Goodman’s clients generally understood that he would invest their funds in securities based on their conversations with Goodman,” the SEC complaint read.
According to the U.S. Attorney’s Office, Goodman defrauded at least 23 investor clients and lied to potential and current clients about how he was using their funds. Clients would typically invest funds with Goodman by transferring money into bank accounts controlled by Goodman in the name of Becoming Financial, according to the SEC. Goodman would then use client funds for his own expenses, including renovations and building expenses, car payments and vacations.
Joseph Dixon, the attorney representing Goodman, told WealthManagement.com that Goodman reported himself to the DOJ.
"He takes full responsibility for his actions and is doing what he can to make amends," he said.
According to the SEC, Goodman would falsify account statements and create computer screenshots purporting to show clients’ funds were “properly invested” and had accrued more value over time. The SEC cited the example of two unnamed clients who’d seen several falsified computer screenshots showing that their retirement account was invested in mutual funds and had appreciated to more than $400,000.
“In reality, Goodman spent virtually all of their money on construction and renovation expenses, American Express payments, transfers to family members and other individuals, and for other personal use, including furniture and a Royal Caribbean cruise, within two to three months of receiving their funds,” the complaint read.
In addition, Goodman would pay existing clients when new clients (and investments) came on board; he used $13,000 of the two unnamed clients’ funds to make such Ponzi-like payments to other clients, according to the SEC. One other client was told her investment had grown to more than $600,000, while in reality, her funds were used to make other personal payments, according to the complaint.
Clients soon became suspicious and demanded Goodman return their investments, according to the SEC. By September 2020, the third unnamed client told Goodman she wanted to be transferred to another advisor, and he made excuses that delayed the transfer, including that there’d been a COVID-19 exposure at his office. Finally, the client threatened to report Goodman to the Minnesota Attorney General, and he returned about $16,000 to the client, funds that came from a different client, the SEC claimed. But by November of last year, Goodman consented to the Minnesota State Department of Commerce suspending his firm’s registration due to the accusations.
Goodman faces a criminal charge of one count of mail fraud. The SEC sought an injunctive relief, as well as disgorgement, prejudgment interest and civil penalties, and also requested a jury trial.