The following story appeared in InvestmentNews on November 20, 2013:
A broker who worked for a firm alleged to have sold more than $18 million in fraudulent promissory notes to 58 investors, many of whom current and former NFL and NBA players, was barred last week by Finra.
The broker, Jinesh “Hodge” Brahmbhatt, was a broker with Success Trade Securities Inc. from 2009 until April, and got his start in the securities business in 1994 with the infamous boiler room Stratton Oakmont.
The letter of acceptance, waiver and consent from the Financial Industry Regulatory Authority Inc. does not specifically mention Mr. Brahmbhatt’s work with Success Trade as the reason for his being barred; instead, it cites his failure to appear and testify in August at a disciplinary hearing regarding Success Trade and its chief executive, Fuad Ahmed.
In April, Finra filed a cease-and-desist order against Success Trade and Mr. Ahmed “to halt further fraudulent activities” as well as “the misuse of investors’ funds and assets.” At the same time, Finra filed a complaint against Mr. Ahmed and Success Trade alleging “fraud in the sale of promissory notes issued by the firm’s parent company, Success Trade Inc.”
According to a report on Yahoo Sports, Mr. Brahmbhatt was once registered in the financial advisers program established by the NFL Players Association. He dropped his Finra license in April, and told Yahoo Sports at the time that he had more than 30 clients who had bought about $12 million of the allegedly fraudulent promissory notes from Success Trade.
Professional athletes often become targets of fraudulent investment schemes. An August report in InvestmentNews highlighted this issue, noting that many athletes skilled enough to play professional sports are totally unprepared for their sudden wealth. They spend too much too quickly, invest poorly and often become victims of fraudsters.
A high proportion of them, in fact, don’t achieve financial security but end up in financial ruin, often in worse condition after their playing days are over than when they started their athletic careers.
Finra over the past decade has warned broker-dealers and investors of the potential dangers in buying preferred shares and promissory notes of small, private broker-dealers such as Success Trade.
Reached on Wednesday morning, Mr. Ahmed said he had no comment about the Finra allegations at this stage. “We had our hearing in August, we defended ourselves and are waiting for the decision by Finra,” he said.
Mr. Brahmbhatt had previously testified with Finra, but being barred from the securities industry is a typical resolution for brokers who fail to show up at hearings, said Alan Futerfas, his attorney.
Employees of Mr. Brahmbhatt’s advisory firm, Jade Private Wealth Management, family members and even Mr. Brahmbhatt invested in the promissory notes, Mr. Futerfas said.
“They met with the principals of Success Trade and presented with the same information that the athletes were told,” he said. “They were not involved in something they didn’t put their money into.”
Calls on Wednesday to Mr. Brahmbhatt’s registered investment adviser firm, Jade Private Wealth Management LLC, could not be be completed.
According to Yahoo Sports, athletes who bought the Success Trade notes include Detroit Pistons guard Brandon Knight, Cleveland Browns cornerback Joe Haden, San Francisco 49ers tight end Vernon Davis, former Washington Redskins running back Clinton Portis and Chicago Bears defensive end Adewale Ogunleye.
So far, at least one NFL player, Jared Odrick of the Miami Dolphins, has filed a Finra arbitration complaint against Mr. Brahmbhatt, Success Trade and Mr. Ahmed.
Mr. Odrick filed the arbitration complaint in April. According to the complaint, he invested $625,000 in Success Trade notes and one other series of promissory notes beginning in 2011, with promised returns of 10% to 12.5%. The Success Trade note “was part of a large Ponzi scheme orchestrated by Success Trade, Ahmed and Brahmbhatt,” according to the complaint.
More NFL and NBA players are considering filing arbitration complaints over the Success Trade notes, said Jeffrey Sonn, Mr. Odrick’s attorney. “The bottom line is, this stuff wasn’t properly registered as securities and never should have been sold,” said Mr. Sonn adding that in the last few weeks, he had been hired by one player from the NBA and another from the NFL who also bought the notes. “I think this is far from over.”