The SEC obtained a final judgment in a U.S. District Court last week against a Connecticut-based investment advisor who defrauded investors of more than $4 million, capping a multiyear saga that landed the advisor a prison sentence totaling more than three years.
The commission originally filed a complaint against Booth in September 2019, shortly before Booth pleaded guilty to one count of securities fraud in the U.S. District Court for the Southern District of New York on Oct. 22, 2019. The SEC barred him from associating with any broker/dealers or investment advisors in November of that year. Last November, Booth was sentenced to 42 months in prison, which is to be followed by three years of supervised probation. Additionally, the court ordered Booth to pay nearly $5 million in forfeiture.
The Justice Department argued that between 2013 and 2019, Booth falsely promised multiple investors that he’d invest their money in securities outside of their typical advisory and brokerage accounts, directing several clients to write checks or wire funds to an entity entitled “Insurance Trends, Inc.” But this account was controlled by Booth, and he used the funds he raised for his own personal and business expenses. The DOJ claimed Booth raised more than $4.9 million from about 40 investors.
In one case, Booth promised a recently widowed elderly client to move money received from her late husband’s pension into the fictitious account, saying she would have $1 million by the time she reached 100 years old (the unnamed widow invested more than $600,000 with Booth, the DOJ stated). In another instance, Booth convinced one client to invest $60,000 they’d saved for their child’s college expenses into a product that Booth claimed would never lose its principal and would in fact increase along with the market. One other elderly investor withdrew about $18,000 from an annuity created to care for their disabled sibling and gave it to Booth, believing the advisor would invest it to make more money for their sibling’s medical needs, according to the Justice Department.
Throughout all of this, Booth fabricated account statements to stop investors from seeking returns on their funds, as well as to entice more investments. The false statements claimed Booth had purchased securities on the investors’ behalf, and that they’d made a profit, the Justice Department argued. He also used new investors’ funds to pay old investors in a manner akin to a Ponzi scheme, according to the DOJ.
The final judgment against James T. Booth was issued on Feb. 19 in the U.S. District Court for the District of Connecticut and “permanently enjoined” him from future violations of federal antifraud provisions.