SEC Charges Massachusetts Adviser With Fraud

The complaint, filed in federal district court on June 19, alleges that from at least 2006 to the present, Martel—who conducted business under multiple names including Martel Financial Group and MFG Funding—defrauded at least 12 investors in Massachusetts, Vermont and Florida of no less than $1.6 million, and likely obtained significantly more from other investors. Today, with Martel’s consent, a federal judge entered an order freezing Martel’s assets and prohibiting him from continuing to violate the anti-fraud provisions of the federal securities laws.

Martel told investors—many of them retirees looking for a safe investment to generate reliable income—that he would place their money in “pass-through bonds” or other purported fixed-income or pooled-investment products. He assured clients the investments were safe, according to the charges.

Martel created account statements showing interest earned and sometimes made small distributions of supposed interest, which encouraged investors to give him more money to invest, the complaint alleged. It also stated that offered other fraudulent investments.

In March, according to the complaint, Martel solicited investments in a Facebook investment pool, claiming it would allow small investors to “own a piece” of the Facebook initial public offering. In fact, the investments he offered were fictitious and no longer exist. He transferred funds out of the bank account, where investor funds were deposited, to bank accounts he maintained for his businesses, the complaint alleged.

It also said that Martel violated sections of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.

In its action, the Commission seeks the entry of a permanent injunction against Martel, disgorgement of ill-gotten gains plus pre-judgment interest, and the imposition of civil monetary penalties. In addition to freezing his assets and prohibiting him from violations of anti-fraud provisions of the federal securities laws, Martel is prohibited from soliciting, accepting, or depositing any money from investors and from altering or destroying any relevant documents, and also requires him to provide an accounting of their assets and uses of investor funds.

The Massachusetts Securities Division notified the SEC of Martel’s conduct and investor losses, and last week filed an action against Martel based on the same conduct.

The SEC’s statement and court documents are here.