The Securities and Exchange Commission annouced that it charged Stephen B. Blankenship and his company based in Danbury, Conn., with stealing at least $600,000 from customers who he persuaded to withdraw money from their brokerage accounts he managed at other firms and instead invest with him directly. A copy of the SEC’s complaint can be found by clicking here.
According to the SEC, “most of the investors lied to by Blankenship were brokerage customers of his, first at Syndicated Capital, Inc., a registered broker-dealer based in Santa Monica, California and then at Vanderbilt Securities, LLC, a registered broker-dealer based in Melville, New York..”
The SEC alleges that Blankenship lured about a dozen customers – including some retirees and others he met at church – into his scheme by assuring them they could obtain a greater rate of return on their money by transferring it to his firm, Deer Hill Financial Group. Blankenship claimed he was investing their money in established securities such as publicly-traded mutual funds. But in reality he made no investments and merely transferred customer money to his own bank account, and he misused it to pay his mortgage, travel, and grocery bills among other personal expenses. Blankenship also paid some business expenses and made Ponzi-like payments to other customers who requested a return of all or part of their investment.
In a parallel action, the U.S. Attorney’s Office for the District of Connecticut today announced criminal charges against Blankenship.
“Blankenship took advantage of fellow churchgoers and senior citizens who relied on their savings for retirement and placed their trust in him,” said David P. Bergers, Director of the SEC’s Boston Regional Office. “He betrayed that trust by using their money to make personal credit card payments and home improvements.”
According to the SEC’s complaint, some of his customers had been with Blankenship for as long as two decades. Beginning in at least 2002, Blankenship took advantage of those longstanding relationships and began convincing customers to withdraw money from their brokerage accounts at those firms with promises that he could achieve a greater rate of return for them directly by investing their money through Deer Hill.
The SEC alleges that in order to conceal his scheme, Blankenship often created fake account statements that falsely represented that he had invested their money in a variety of investments. The purported account statements were printed on Deer Hill letterhead and provided to customers. In all instances, the investments described on the account statements did not exist.
The SEC’s complaint alleges that Deer Hill and Blankenship violated the antifraud provisions of the federal securities laws and acted as unregistered brokers. The complaint seeks disgorgement of ill-gotten gains plus prejudgment interest, monetary penalties, and the entry of a permanent injunction against Deer Hill and Blankenship, who lives in New Fairfield, Conn.
Based on the same misconduct, the U.S. Attorney’s Office for the District of Connecticut charged Blankenship with criminal violations. The Connecticut Department of Banking’s Securities Division has obtained, by consent, a revocation of Blankenship’s registration and has barred Blankenship and Deer Hill from operating in Connecticut. The SEC thanks the U.S. Attorney’s Office for the District of Connecticut, the Connecticut Department of Banking’s Securities Division, and the police department in Danbury, Conn., for their assistance in this matter.
If you sustained losses by investing with Stephen B. Blankenship, please contact KlaymanToskes to discuss your legal options, and to explore whether you are eligible to file a securities arbitration claim or lawsuit in an effort to recover your losses.
From March 2002 to May 2006, Blankenship was registered with Syndicated Capital. Thereafter, from May 2006 to November 2011, Blankenship was registered with Vanderbilt Securities. Under FINRA Rules, these firms were obligated to properly supervise the activities of Blankenship during the time he was registered with the brokerage firms. Accordingly, these brokerage firms may be liable for failing to supervise Blankenship’s activities while registered at thes firms, and could potentially be responsible for compensating customers of Blankenship for their losses.