SEC Charges Christopher Dougherty, an Investment Adviser with Running a Ponzi Scheme
On April 26, 2019, the SEC charged Christopher Dougherty and several entities he controlled, with operating a Ponzi scheme that defrauded his investment advisory clients out of $7 million. The San Diego District Attorney’s Office separately announced criminal charges related to the same conduct.
The SEC alleges that Christopher Dougherty provided investment advice to school district employees, hospital employees, veterans, and neighbors, most of whom were unsophisticated investors and trusted Christopher Dougherty completely.
According to the SEC’s complaint, Christopher Dougherty had his own California-registered investment advisor, C&D Professional Services, Inc. and through C&D Professional Services, offered clients the opportunity to invest in tax-free “private placements” that purportedly provided quarterly dividends of about 5%. The complaint alleges that, in reality, there were no private placements. Christopher Dougherty was simply running a Ponzi scheme by taking new investor money and using it to pay quarterly dividends to existing investors and his personal expenses. According to the complaint, Christopher Dougherty also offered investors the opportunity to invest in his farm – JTA Farm Enterprises, LLC, and his real estate business – JTA Real Estate Holdings, LLC, but investor funds in these ventures were commingled with the C&D investments and used as part of the Ponzi scheme fraud as well. Christopher Dougherty and his wife filed for personal bankruptcy in October 2018.
The SEC’s complaint charges Christopher Dougherty, C&D Professional Services, JTA Farm Enterprises, and JTA Real Estate with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, and Section 10(b) and Rule 10b-5 of the Securities Exchange Act, and charges Christopher Dougherty and C&D with violating the antifraud provisions of Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. It also seeks relief including permanent injunctions, disgorgement of ill-gotten gains plus interest, and civil penalties.
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