Former Financial Advisor Runs Fraudulent Scheme Targeting Vulnerable Elderly Investors

A former Wells Fargo registered representative in Daytona, Ohio is facing charges by the Securities and Exchange Commission for defrauding investors out of over a million dollars in a fraudulent scheme that targeted seniors. The SEC filed a complaint against John Gregory Schmidt with the United States District Court for the Southern District of Ohio on Tuesday. Allegedly, Mr. Schmidt made unauthorized sales and withdrawals from variable annuities to use the proceeds for covering shortfalls in other customer accounts. While Mr. Schmidt allegedly received over $230,000 in commissions, his customers were unaware of the transactions. When the scheme unraveled, it is reported that involved investors discovered that the account balances provided by their trusted financial adviser were false. Our investor fraud attorneys are currently investigating into customer claims against Mr. Schmidt.

The SEC complaint alleges that John Gregory Schmidt sold securities from seven of his investors and transferred proceeds to other customer accounts. Most of the securities were variable annuities that required letters of authorization, which Mr. Schmidt is alleged to have forged without client consent. Instead of notifying certain clients of their dwindling account balances, Mr. Schmidt allegedly sent false account statements and permitted excessive withdrawals. Unbeknownst to the client with account shortfalls, it is charged that the received money was illegally retrieved from other customer accounts. The SEC claims that Mr. Schmidt’s misrepresentations violate federal securities laws, including Section 10(b) of the Exchange Act and Exchange Act Rule 10b-5.

It is important to note that John Gregory Schmidt’s alleged fraudulent actions appear to have targeted some of the most vulnerable people in society. Mr. Schmidt, who is 65 years old, ran a fraudulent scheme that targeted elderly victims not too far off from his age, according to the complaint. Several of his reported victims were suffering from medical conditions such as Alzheimer’s and other forms of dementia. Tragically, at least five of the defrauded investors have passed away and will never be able to see justice served.

John Greg Schmidt (CRD#708094) has worked for 9 firms in his 37 years of experience in the securities industry, according to his BrokerCheck records. As stated, Schmidt was most recently registered with Wells Fargo Advisors until his termination in October 2017 in relation to allegations of unauthorized money movement and falsified account statements. Prior to Wells Fargo Advisors, John Schmidt was registered with Stifel, Nicolaus & Company, Inc. (793), First Union Securities, Inc. (CRD#19616), First Union Capital Markets Corp. (CRD 6124), PaineWebber Inc.(CRD#8174), Prudential-Bache Securities Inc. (CRD#7471), IDS Life Insurance Company (CRD#6321), IDS Marketing Corporation (CRD #6363)  and IDS Financial Services Inc. (6320). Mr. Schmidt has five customer disputes and a regulatory disclosure on his BrokerCheck.

Investment fraud attorneys question how Schmidt was able to misappropriate client funds as a registered representative for brokerage firms required to supervise his activity. Pursuant to FINRA Rule 3110, broker-deals are required to have a system in place to sufficiently supervise the activities of registered representatives. Yet, Mr. Schmidt apparently managed to get away with defrauding some of the most vulnerable people while working under Wells Fargo and other firms if the SEC is correct. Broker-dealers can be held responsible for returning the losses resulting from their registered representative’s misconduct.

Malecki Law believes that investors with claims against brokerage firms for not supervising people like Mr. Schmidt are better off pursuing their claim in FINRA arbitration. In their complaint, the SEC does request that Schmidt disgorge any received ill-gotten gains, but there are no guarantees. Court cases typically require extensive time and costs with no guarantees of collecting money even after receiving a favorable judgment. Broker-dealers that receive judgments in FINRA arbitration are mandated to pay the required award or risk losing their registration.

Investors who have lost money from a FINRA registered broker’s misconduct have that right to seek justice. Our investor fraud attorneys have helped numerous investors pursue recovery of their losses in FINRA arbitration. Contact our NYC based securities law firm for more information and a free consultation.