On August 9, the U.S. Securities and Exchange Commission charged a former registered representative, John C. Maccoll, who was affiliated with the Birmingham, Michigan, branch of UBS Financial Services1, with defrauding brokerage customers out of almost $4 million in what the SEC termed as a long running-investment scam. Additionally, U.S. Attorney Matthew Schneider charged Maccoll with wire fraud.
The scam that Maccoll perpetrated on his victims had many of the red flags, or aspects of concern, which investors are warned to be wary of when investing their hard-earned money.
Maccoll selected his victims from among his UBS Financial Services clients, so there were already long-standing relationships and trust between Maccoll and his clients. Many were elderly and retired and invested through their retirement accounts according to the SEC.2 Macoll told those 15 select customers that they could get in on this highly-sought-after private fund investment which would net them annual investment returns as high as 20 percent and give them investment growth potential that was better than the growth they received in their brokerage accounts. This is one of the primary red flag items to look out for when investing. If the promised return on investment seems too good to be true, it probably is not true.
According to the SEC, Maccoll told his investors not to tell anyone about the deal because he could not open the deal to everyone. Leading investors to believe they are getting in on an exclusive deal, that is only available to a select or limited amount of people, is another warning sign that the investment offering may be a scam. He also had investors transfer money or write checks to his personal accounts.3 This is a highly irregular way of doing business which his potential investors should have taken as a warning sign to not invest in his scheme. Instead, they should have contacted the SEC or local law enforcement.
Maccoll used the name of a real family of alternative investment funds to lend legitimacy to his fraudulent offering. He had told investors that they should expect little information such as a prospectus, trade confirmations or account statements, directly from the fund. Again, Maccoll’s statements about information flow should have made potential investors wary of this investment. At one point he did develop and send some of his customers fake account statements reflecting fictitious returns on their investments. In fact, errors and misspellings on an account statement Maccoll issued were what prompted one of his investors to contact federal authorities.
The SEC Complaint alleges that Maccoll spent nearly $3.6 million of the $4 million he received from investors on his own personal expenses. He did pay out $400,000 in Ponzi-like payments to certain customers in order to keep the scam going. By April 2018, Maccoll had less than $7,000 remaining in his bank accounts. 4
If you have questions about investment fraud, financial schemes, broker misconduct, or about your broker’s management of your account, please contact our Securities Law Firm at: 313-334-7767 for a Free case evaluation. We have been helping investors recover losses from fraudulent financial advisors for over 20 years!
1,3 Birmingham financial adviser charged with stealing $3.7M from clients, Detroit Free Press, August 10, 2018
2 SEC Charges Michigan Investment Professional in an Investment Scam Targeting His Brokerage Customers, SEC, August 9, 2018
4 U.S Securities and Exchange Commission v. John C. Maccoll Complaint, 2018