Investment Adviser Fleeces Clients

Investment advisers owe their clients a fiduciary duty, one of the highest obligations under the law. The obligation fits well with the duties and responsibilities of the typical advisor and advisory. The obligations are those of a trusted adviser. They include giving proper investment advise to clients, often having custody of the client assets and, in sum, rendering the best investment advice possible to the client. Unfortunately, in some instances the advice rendered is not the best for the client but for the adviser. The Commission’s most recent case in this area clearly illustrates the point, SEC v. Goltry, Civil Action No. 3:24-cv-06976 (D. N.J. Filed June 12, 2024).

Named as defendants in this action are: Joshua Goltry and JAG Capital Advisors, LLC. Mr. Goltry is the founder and investment manager of JAG Capital. The principal place of business of the firm was Miramar, Florida; JAG is a Florida limited liability company. It purported to be a long/short equity fund and pooled investment vehicle. The firm invested in e-commerce, software, cybersecurity, semiconductor, fintech, gaming and alternative energy industries.

Over a three-year period, beginning in 2020 Defendants raised at least $3 million from about nine investors. In doing so, Defendants “lied about nearly every aspect of JAG Fund’s operations, including its performance, investment activity and its risk protocols,” according to the complaint..

Defendants lost over $1.7 million of the investor funds through high-risk trading and speculative investments made with investor capital. Defendants also misappropriated over $1.1 million of the investor funds, diverting them to personal use. And, Defendants concealed the losses from the fund administrator, as well as the clients, by falsely inflating the value of other assets. By August 2023 the Fund was depleted; now it is defunct. The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b), and Advisers Act Sections 206(1), 206(2) and 206(3).

Defendants agreed to settle the action, consenting to the entry of permanent injunctions based on the Sections cited in the complaint. The court will determine monetary penalties at a later date. The U.S. Attorney’s Office for the District of New Jersey announced criminal charges against Mr. Goltry. See Lit. Rel. No. 26028 (June 14, 2024).