The SEC has filed fraud charges against investment adviser Arthur S. Hoffman, saying that he misled clients by hiding financial conflicts of interest.
Arthur S. Hoffman, Investment Consultant
On February 24, 2022, the SEC said that Ameriprise Financial Services investment adviser representative Arthur S. Hoffman was being charged because of the advice he gave to clients.
According to the SEC‘s complaint, Hoffman told clients from May 2019 to December 2019 to buy stocks from Zima Global Ventures, LLC, which said it would use client funds to trade cryptocurrencies and other digital assets profitably. Before these recommendations, it was not known that Zima had agreed to lend Hoffman up to $1.5 million at 2% interest per year to help him find investors, or that Hoffman already owed Zima tens of thousands of dollars under that agreement.
The SEC says that when a client asked Hoffman about his pay from Zima, Hoffman said that because he worked for Ameriprise, he couldn’t get more than a 1% commission. The truth is that Hoffman was barred by Ameriprise from suggesting these investments to clients and that his real reward was more than $170,000 in low-interest loans from Zima or more than 25% of the total amount invested by his clients.
In addition to allegedly violating Ameriprise’s policies and procedures by using a personal email address to communicate with clients about Zima’s securities, Hoffman is also accused of convincing two clients to lie to Ameriprise about Hoffman’s involvement in the investments in question.
Eight of Hoffman’s customers followed his advice and put more than $640,000 into Zima’s securities. Six of Hoffman’s clients lost a total of about $610,000 when Zima failed in January 2020, and its founders were arrested and charged with conspiracy to commit wire fraud and money laundering.
The SEC’s complaint says that Hoffman broke the laws against fraud in the Securities Act of 1933, the Securities Exchange Act of 1934, and Rule 10b-5, as well as Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. Hoffman has agreed, without admitting or denying the SEC’s claims, that a permanent injunction should be put in place if a judge agrees.
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