SEC Sues Lombard Securities Advisor for $8 Million Ponzi Scheme
A former Lombard Securities Inc. investment advisor has been named in a suit filed by the U.S. Securities and Exchange Commission (SEC) in New York federal court. The suit alleges that Steven Pagartanis, 58, of East Setauket, New York, defrauded at least nine investors in an $8 million Ponzi scheme.
The SEC says that Pagartanis used false and misleading statements to solicit long-standing brokerage customers, many of whom were retired, that ultimately led to significant losses for the investors. The pitch was that the money would be used for investments in a land development company that would yield monthly returns.
According to the SEC, Pagartanis never made any investments. Instead, he funneled investors’ money into various personal bank accounts and used the money to pay for his personal expenses. To cover up the scheme, the advisor used newer investors’ money to make monthly payments to earlier investors, a hallmark of a Ponzi scheme.
Advisor Used Relationships to Raise $8 Million
Between 2013 and 2018 Pagartanis raised $8 million from at least nine investors. Pagartanis has been associated with broker-dealers since 1989 and was a registered representative of Lombard Securities between September 2017 and March 2018.
The SEC’s complaint states that Pagartanis used his long career in the securities industry and association with broker-dealers such as Lombard Securities to take advantage of relationships he had built with customers to raise the funds.
Ponzi Scheme Advertised as Land Development Investment
According to the complaint filed, Pagartanis told at least five of the defrauded investors that they were investing in shares of Genesis Land Development Co., a publicly traded Canadian land development and home building company. He promised that an investment would provide guaranteed repayment of principal with a fixed return of between 4.5 and 8 percent annually.
From these five investors, Pagartanis raised at least $6.7 million, pulling in the remaining $1.3 million from other investors who were pitched on a more general investment opportunity in a land development company.
The SEC claims that investors’ checks were deposited in a bank account for Genesis I Holdings LLC, an entity of which Pagartanis was the sole principal and owner. To cover up the scam, Pagartanis provided investors with false account statements and documents indicating they owned stock in Genesis Land Development Co. and used some of the funds to make the promised monthly payments. Approximately $1.8 million of the money raised was used to make the monthly payments back to investors, with the rest going directly to Pagartanis to pay personal expenses.
According to the SEC complaint, the scheme fell apart earlier this year when Pagartanis stopped making monthly payments to investors. When investors contacted him to inquire about the investment and request their money back, he ignored the requests.
In March 2018, Pagartanis failed to appear for two interviews with the compliance staff of Lombard Securities and another with the Financial Industry Regulatory Authority (FINRA), triggering an investigation. The interviews were the result of investor complaints.
SEC Seeks Monetary Penalties
The SEC is seeking civil monetary penalties and an order for Pagartanis to disgorge his ill-gotten gains, plus pre-judgment interest. The regulator is alleging a violation of two anti-fraud provisions of federal securities laws.
Pagartanis was fired from Lombard Securities and barred from the securities industry by FINRA and also faces criminal charges in state court.
Did you Lose Money Investing with Lombard Securities Advisor Steven Pagartanis?
If you think you may have lost money investing with Lombard Securities Advisor Steven Pagartanis or may have been a victim of a Ponzi scheme, contact an experienced attorney right away to discuss your rights and options.
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Dimond Kaplan & Rothstein, P.A. is an AV-rated* litigation law firm that represents investors nationwide in investment fraud and securities fraud cases. DKR’s lawyers have recovered millions of dollars for Ponzi scheme victims.