The Securities and Exchange Commission (SEC) has charged two North Carolina-based executives and their Malta-based registered investment adviser, alleging they defrauded clients via undisclosed transactions.
The SEC alleges in the complaint filed in the U.S. District Court for the Middle District of North Carolina that Gregory E. Lindberg, Christopher Herwig, and Standard Advisory Services Limited defrauded clients out of over $75 million, with the undisclosed transactions benefiting themselves and their companies.
According to the SEC complaint, from July 2017 through 2018, Lindberg and Herwig, through Standard Advisory, breached fiduciary duties to their advisory clients by fraudulently causing them to engage in undisclosed related-party transactions, not in the best interest of their clients, with the SEC also alleging the defendants misappropriated over $57 million in client fund.
Standard Advisory collected more than $21.4 million in advisory fees, the SEC alleges, maintaining Lindberg allegedly orchestrated the schemes through complex investment structures and affiliate companies and allegedly used the proceeds to pay themselves or divert the funds to Lindberg’s other businesses.
“We allege a massive fraudulent scheme, involving unique financial structures and various complex investments, orchestrated by the defendants for their own benefit over their advisory clients’ benefit,” SEC Chief of the Division of Enforcement’s Complex Financial Instruments Unit Osman Nawaz said, adding the complaint filing demonstrates the SEC will take action to protect investors from investment advisers who attempt to evade fundamental fiduciary responsibilities.
The SEC alleges Lindberg, Herwig, and Standard Advisory violated the antifraud provisions of the Investment Advisers Act of 1940 and seeks disgorgement plus prejudgment interest, penalties, and permanent injunctions.