May 17, 2023/US SEC
On May 12, 2023, the U.S. District Court for the Eastern District of New York entered a final judgment against New York investment adviser Brian Callahan, Callahan’s brother-in-law Adam Manson, and Manson’s two entities for their role in a Ponzi scheme halted by the SEC’s emergency action filed on March 5, 2012.
According to the SEC’s amended complaint, from at least 2005 to January 2012, Callahan raised over $90 million from at least 45 investors for his five offshore funds. Callahan managed and made the investment decisions for the five funds through his two investment advisory entities and received inflated management fees. Callahan misused investor assets to pay certain other investors seeking redemptions and for personal expenses, and improperly diverted assets of the funds to Manson’s private real estate project on Long Island. Manson and his entities, Distinctive Investments, LLC and Distinctive Ventures, LLC, created a paper trail of inflated false promissory notes and false audit confirmations that helped Callahan conceal the scheme.
Without denying the SEC’s allegations, Callahan, Manson, Distinctive Investments and Distinctive Ventures consented to the entry of a final judgment that permanently enjoins them from violating antifraud provisions of the federal securities laws. On March 9, 2013, Callahan’s investment advisory entities and offshore funds also were enjoined from violating antifraud provisions. A Court-appointed receiver in the SEC’s action and criminal authorities in a parallel criminal action collected and distributed to harmed investors over $51 million.
In 2014, Callahan and Manson pled guilty to securities fraud charges in the criminal action, United States v. Brian R. Callahan and Adam Manson, Crim. No. 13-453-GRB (E.D.N.Y.). In 2017, Callahan was sentenced to 12 years in prison followed by three years of supervised release and ordered to pay restitution of more than $67 million. In October 2022, Manson was sentenced to two years in prison and one year of supervised release, and he paid, forfeited, and surrendered rights to certain monies.
The SEC’s litigation was conducted by Dean M. Conway, Lisa Deitch, Ashley Sprague and Holly Yoshinari and was supervised by Stacy Bogert and James Connor.
See Litigation Release Nos. LR-22275 (March 6, 2012), LR-22311 (March 28, 2012) and LR-22386 (June 1, 2012).