SEC Charges New York Investment Adviser with Fraud

Jack Humphrey, Regulatory journalist
March 08, 2012 /

The US Securities and Exchange Commission filed charges against a New York investment adviser for defrauding investors in five offshore funds and using some of their money to buy himself a multi-million dollar beach resort property on Long Island.

Brian Raymond Callahan, of Old Westbury, New York, allegedly raised more than $74 million from at least two dozen investors since 2005, promising them their money would be invested in liquid assets, the SEC alleged in a complaint filed in federal court in Islip, New York.

Instead, Callahan diverted investors’ money to his brother-in-law’s beach resort and residences project, which was facing foreclosure, and in return received unsecured, illiquid promissory notes, according to the complaint. Callahan also used investors’ funds to pay other investors and to make a down payment on the $3.35 million unit he purchased at his brother-in-law’s real estate project, the SEC alleged.

Callahan operated the five funds through his investment advisory firms, Horizon Global Advisors Ltd., and Horizon Global Advisors, LLC, and used the promissory notes to hide his misuse of investor funds, the complaint alleged.

The promissory notes overstated the amount of money diverted to the real estate project; for instance, in 2011, Callahan received $14.5 million in promissory notes in exchange for only $3.3 million he provided to his brother-in-law. The inflated promissory notes allowed Callahan to overstate the amount of assets he was managing, and inflate his management fees by 800% or more.

Callahan refused to testify in the SEC’s investigation and recently informed investors about the investigation, but gave false assurances that no laws had been broken. Callahan also misled investors by not disclosing that in 2009, the Financial Regulatory Industry Authority barred him from associating with any FINRA member, the SEC alleged.

At the SEC’s request, and after a court hearing on March 5, 2012, the court granted a temporary restraining order freezing the assets of Callahan and his advisory firms, enjoining them from violating the antifraud provisions and granting other emergency relief.


Share your opinion

SEO Powered By SEOPressor