SEC Charges Ohio Broker with Defrauding Senior Customers

September 25, 2018/US SEC

The Securities and Exchange Commission today charged a former Dayton, Ohio registered representative with defrauding his retail brokerage customers out of over $1 million in a long-running scheme.

According to the SEC’s complaint, John Greg Schmidt, who was associated with an SEC-registered broker dealer, sold securities of at least seven of his customers and secretly transferred over $1 million in proceeds to 10 other customers to cover shortfalls in their accounts. As alleged in the complaint, Schmidt accomplished his scheme by making unauthorized sales and withdrawals from variable annuities held by the customers, secretly transferring funds using fraudulent letters of authorization, and issuing fake account statements. Most of the injured customers were elderly with little to no financial expertise and were particularly vulnerable. Schmidt received over $230,000 in brokerage commissions from these customers.

The SEC’s complaint, filed in federal district court in the Southern District of Ohio, charges Schmidt with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC is seeking a judgment ordering Schmidt to disgorge his ill-gotten gains with prejudgment interest, and to pay civil penalties.

The SEC’s investigation, which is continuing, is being conducted by Peter Senechalle, Luz M. Aguilar and Anne C. McKinley of the Chicago Regional Office. The litigation will be led by Timothy S. Leiman. The case is being supervised by Kathryn A. Pyszka. The SEC appreciates the assistance of FINRA, the Ohio Department of Insurance, and the Ohio Department of Commerce’s Securities Division.

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