US Attorney and SEC Charge Investment Advisor In $20 Million Fraud
April 17, 2015
On April 16, 2015, the United States Attorney for the Southern District of New York announced that Michael Oppenheim, 48, Livingston, NJ had been charged in a Criminal Complaint with one count each of wire fraud, embezzlement, securities fraud, and investment adviser fraud in connection with his alleged conversion of $20 million in client funds from March 2011 to March 2015. If convicted, in addition to a maximum fine of $5 million or twice the gross gain/loss, Oppenheim faces up to 30 years in prison on the embezzlement count; 20 years on the wire and securities fraud counts; and 5 years on the investment adviser fraud count. United States of America, Plaintiff, v. Michael Oppenheim, Defendant (Criminal Complaint, SDNY, 15-MAG-1255, April 15, 2015).
NOTE:
Oppenheim is presumed innocent unless or until he is proven guilty beyond a
reasonable doubt in a court of law.
In Paragraph 10(b) of the Criminal
Complaint, it is alleged
that
At all times relevant to this Complaint, MICHAEL OPPENHEIM, the defendant, held himself out as an investment adviser. From in or about 2002, until in or about February 2004, OPPENHEIM was employed by the Bank, and held the title of Personal Financial Advisor. OPPENHEIM briefly left the Bank, and then returned to his employment at the Bank from in or about May 2004 until on or about March 18, 2015, and held three titles during that time: Personal Financial Advisor, Financial Advisor, Senior Financial Advisor and, most recently, Private Client Advisor. At all times relevant to this Complaint, OPPENHEIM was a registered broker-dealer representative with the Sec urities and Exchange Commission ("SEC") and, as of at least on or about October 7, 2002, OPPENHEIM was a registered investment adviser representative with the SEC. His duties and responsibilities during his employment with the Bank included assisting Bank clients with (i) the purchase and sale of securities, (ii) managed investment accounts and (iii) other fiduciary programs offered by the Bank.
The Criminal Complaint alleges that at the time of his termination by the Bank, Oppenheim had about 500 clients with some $89 million in assets under his management. Oppenheim allegedly induced his victims to withdraw hundreds of thousands and even millions of dollars from their Bank accounts based upon his false representations that he would invest the proceeds in low-risk municipal bonds. Those bonds would purportedly be held in a Bank account. Contrary to his representations, Oppenheim allegedly withdrew funds from the clients' account and deposited the proceeds in at least three online brokerage accounts under his control at other financial institutions.
Once in control of the converted funds, Oppenheim
used the money to pay personal expenses such as a home loan and other bills. In
furtherance of his scheme, he attempted to cover his tracks by fabricating account
statements showing the purchase of bonds and, in some cases, the deposit of funds (but said
funds were converted from other victims' accounts). In March 2015, the Bank
terminated Oppenheim.
SEC ComplaintSIDE BAR:Online FINRA BrokerCheck records as of April 17, 2015, disclose that Oppenheim was employed with Chase Investment Services Corp from May 2004 to October 2012 and then with J.P. Morgan Securities LLC.
On April 16, 2015, the Securities and Exchange Commission {"SEC") filed Securities and Exchange Commission, Plaintiff, v. Michael J. Oppenheim, Defendant - and - Alexandra Oppenheim, Relief Defendant (Complaint, SDNY, 15-CV- , April 16, 2015) . The SEC Complaint charges Defendant Oppenheim with violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940; and seeks a permanent injunction plus disgorgement, interest and financial penalties The SEC also seeks against Relief Defendant Oppenheim (Defendant's wife) the recovery of customer funds transferred to her.
The SEC Complaint
alleges:
1. This case involves the theft by an investment adviser and broker of at least $20 million from his customers to fund his own brokerage accounts in a scheme that spanned more than three years. While employed as a "private client advisor" at a major New York financial institution (the "Bank"), Oppenheim used his position to persuade at least two customers to withdraw a total of over $12 million out oftheir accounts on the promise that he would use the withdrawals to purchase safe and secure municipal bonds for their accounts. Instead, Oppenheim bought himself cashier's checks and deposited them into his own brokerage account or an account he controlled in the name ofhis wife, Relief Defendant Alexandra Oppenheim. After each theft and deposit, and in short order, Oppenheim lost the bulk ofthe stolen funds in highly unprofitable options trading.
2. To cover up his fraud, and ensure that he could continue it, Oppenheim took steps to hide his theft from his customers, including creating fake account statements and transferring money from one customer's account to another's to replenish amounts he had stolen earlier. For example, in one instance, Oppenheim created false "account statements," to persuade one of these customers that he had bought the municipal bonds he had undertaken to buy for his account. Thus, when "Customer A" asked for a recent statement reflecting his municipal bond holdings, Oppenheim simply pasted Customer A's name onto an account statement reflecting the legitimate holdings of another customer, and forwarded it on to Customer A. In another instance, without authorization from Customer A, Oppenheim transferred money from Customer A to "Customer B" to make up for a shortfall created by his previous theft from Customer B.
3. In engaging in this scheme, Oppenheim has violated (and unless permanently enjoined and restrained, will continue to violate) Section 1 O(b) ofthe Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. § 78j(b), and Rule lOb-S thereunder, 17 C.F.R. § 240.10bS, and Sections 206(1) and 206(2) ofthe Investment Advisers Act of 1940 (the "Advisers Act"), 15 U.S.C. §§ 80b-6(1) and 80b-6(2).
What happened to the bulk of the
stolen customer funds? Alas, the SEC Complaint offers this
allegation:
23. Almost immediately after each deposit ofCustomer A's and Customer C's stolen funds into his brokerage accounts, Oppenheim embarked on sizeable trading of stocks and options, including Tesla, Apple, Google and Netflix. Soon after each deposit, Oppenheim typically lost the entire amount ofthe deposit, and his accounts at Broker 1 and Broker 2 currently show minimal cash balances.
24. In his account at Broker 1, Oppenheim's trading resulted in losses of approximately $13.5 million in 2014 alone.