Joshua Louis Rupp, 37, pleaded guilty in federal court in Grand Rapids and was sentenced in March to serve 16 years in jail for securities fraud. Rupp was already in prison serving a three year and nine month sentence, having pleaded no contest and been convicted of two charges of first-degree home invasion and assault with a dangerous weapon.1
The U.S. Securities and Exchange Commission (SEC) alleged in a Complaint, filed on July 28, 2021, that Rupp was the sole perpetrator in a fraudulent investment scheme conducted from January 2018 through July 2019 which netted over $2.2 million from about 20 investors in Michigan, Florida and abroad.2 Rupp’s investors were largely inexperienced in investing and ultimately lost most of the money they invested, which included retirement funds.
Rupp was never a licensed securities professional and was not affiliated with any brokerage firm as he claimed to these investors whom he met through his work as a licensed builder and through referrals from those investors.
He never completed the Series 57 Securities Trader Representative Exam or any other examination administered by the Financial Industry Regulatory Authority (FINRA) according to the SEC complaint. Rupp told investors that he worked under the supervision of his uncle who was a licensed broker and that his uncle worked for a licensed brokerage firm. This statement was false.
Not only did Rupp not have any formal securities trading training, but he had personally declared bankruptcy twice — once in 2012 and again in 2016. In August 2018, Rupp founded a company called IMS, Ltd., LLC. Rupp opened a brokerage account in the company’s name which he used to deposit and pool investor’s funds and trade securities. IMS was also not registered with the SEC. Rupp also had a brokerage account in his own name and he obtain access to several of his investors’ individual retirement and brokerage accounts in order to trade securities in their accounts.
To perpetuate the fraud Rupp created fake documents showing a licensed brokerage firm’s name and logo next to Rupp’s name and the name of his company, IMS. Rupp had also forged and shown to clients a fake securities license in his name purportedly issued by the State of Michigan. Investors were also given fake statements created by Rupp, one of which “showed the investor’s account balance increasing almost 115% year-to-date and outperforming the average return on Standard & Poor’s Global Rating by 109%.”3
Rupp assured investors that the principal they invested with him was safe, telling some investors that his uncle guaranteed the principal amounts invested against losses and telling other investors that the money invested was protected by insurance. Other investors were assured by Rupp that there was virtually no risk to the amounts invested based on “hedging: or an “algorithm.”
Rupp described to these investor a trading strategy that would net them significant profits and which he termed to one investor as his “golden goose.” It was the iron condor option trading strategy. which is “a trading strategy for options that uses two spreads, both vertical with one a call (option to buy) and the other a put (option to sell).4 The iron condor has been described as “an advanced trading strategy that enables a trader to make a profit when a stock doesn’t move much in price, but like all trading strategies, it is not without its risks.”5
Ultimately Rupp lost or misappropriated most of his investor’s money. “Joshua Rupp preyed on people close to him as well as other members of his community, convincing some of his victims to turn over hundreds of thousands of dollars to his care by lying to them about his credentials and the nature and status of their investments,” said U.S. Attorney Andrew Birge.6
Taking Action as an Investor
Know your rights as an investor and contact an experienced Securities Fraud Attorney with questions about the management of your account. Negligent and fraudulent brokers must be held accountable, and it is critical in establishing an effective legal strategy to protect your rights.
Our Michigan Securities Law Firm has more than 20 years of experience in investment fraud and securities litigation. We have helped countless individuals recover their losses. Call and speak to a securities attorney today.
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1 Man Sent to Prison, Ordered to Pay $2.7M for Securities Fraud, 3/28/2022
Link: https://www.mlive.com/news/grand-rapids/2022/03/man-sent-to-prison-ordered-to-pay-27-million-for-securities-fraud.html
2,3 U.S. District Court Western District of Michigan, U.S. Securities and Exchange Commission Complaint, Case No. 1:21-cv-643, 7/28/2021
Link: https://www.sec.gov/litigation/complaints/2021/comp-pr2021-140.pdf
4 What is the Iron Condor?
Link: https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/iron-condor
5 Iron Condor Risks
Link: https://optionstradingiq.com/iron-condor-risks/
6 Man Sentenced to 16 Years for Faking Stockbroker’s License, Defrauding Investors, by Carolyn Muyskens, The Holland Sentinel, 3/29/2022
Link: https://news.yahoo.com/man-sentenced-16-years-faking-100059282.html