Former Cetera Advisor charged with Securities Fraud by SEC
A financial advisor from Cetera Advisors and the COO of his RIA have been summoned by the U.S. Securities and Exchange Commission (SEC) and charged with securities fraud related to the misappropriation of more than $780,000 of investor money.
Daniel B. Vazquez Sr., the founder of Irvine, California-based Hoplon Financial Group, and Gilbert Fluetsch, the firm’s COO, allegedly pitched a new investment fund called New Economic Opportunities Fund I (NEON) as an investment pool for purchasing and flipping residential properties. The pitch was that funds raised from investors would be used to purchase and renovate real estate, when in fact it was a fraud scheme.
According to filings, Vazquez and Fluetsch instead used client money from NEON’s accounts to pay for personal expenses, including credit card debt, payments for luxury cars, and home improvements for himself and his staff.
The SEC said in a civil complaint filed in the Central District of California that at least 27 clients had invested about $2.2 million into the fund over four years.
Investor Funds Misappropriated
According to the SEC investigation, NEON purchased eight Southern California properties and earned a profit of $917,322 after reselling them. Of that money, Vazquez and Fluetsch transferred $968,436 to Hoplon Financial Group and themselves, an amount that was five times their maximum disclosed fees.
Fluetsch knew about the misappropriation of funds because he managed the funds for the Hoplon—the real estate investment fund and a construction company also owned by Vazquez and Fluetsch. According to investigators, Fluetsch asked Vazquez to reimburse the investment fund but Vazquez never repaid it.
The SEC found that investors only received a small single payment and no profit or even their principal. According to BrokerCheck, a few clients later alleged unsuitable investments, negligence, and other FINRA rules violations and received a $65,000 settlement in August 2016.
SEC Seeking Full Disgorgement and Penalties
According to the complaint filed by the SEC, the regulator is seeking full disgorgement. Vazquez and the firm face two counts of securities fraud and one count of operating an unregistered broker-dealer. Fluetsch was charged with one count of securities fraud and one count of aiding and abetting securities fraud. Currently, neither Vazquez or Fluetsch face criminal charges.
FINRA Arbitration Claims Filed Against Vazquez
There are currently three pending cases against Vazquez, including a FINRA arbitration claim of $500,000 made by relatives who were also clients. Vazquez was barred from the industry by FINRA in September 2016 after he failed to respond to an investigator’s request for information.
After learning of the FINRA investigation, Vazquez resigned from Cetera in May 2016. Cetera was also the parent of Vazquez’s previously shuttered firm, Investors Capital.
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