On Sept. 13 2012, the Securities and Exchange Commission (SEC) filed a complaint in federal court, charging defendants Deer Hill Financial Group, LLC and Stephen Burton Blankenship with crafting a scheme with intent to defraud, committing the fraudulent conduct itself in connection with securities sales, and acting as unregistered broker-dealers.
Blakenship was additionally charged with converting funds for personal use and making Ponzi scheme-style payments to other customers to assuage long-time victims' suspicions.
Complaint, SEC Case 3:12-cv-01317
According to the SEC, Blankenship recruited and lied to several senior citizen and fellow churchgoers who used to be brokerage customers of his at both Syndicated Capital, Inc., a firm based in Santa Monica, California and Vanderbilt Securities, LLC in New York. To entice customers to invest with Deer Hill, Blankenship allegedly promised a significantly higher rate of return at Deer Hill than had been experienced at Syndicated Capital or Vanderbilt.
The Complaint alleges that Blankenship falsely assured customers that their money would be invested in established securities and to cover up his fraudulent misconduct, Blankenship fabricated Deer Hill documents, crafting bogus account statements and other financial reports that showed healthy account balances, wherein reality, Blankenship had already drained customer accounts and converted the funds for personal use.
The SEC alleges Blankenship used this money to pay for groceries, a mortgage, credit cards and travel expenses.
The Complaint seeks injunctive relief, a civil penalty and includes a request for disgorgement of all misappropriated funds, including interest.
Meanwhile, the U.S. Attorney's Office for the District of Connecticut charged Blankenship with several counts of criminal fraud. On Wednesday, Blankenship pleaded guilty to the charges of mail fraud and securities fraud and faces a maximum of 20 years in federal prison on each charge.
A FINRA BrokerCheck for Stephen Burton Blankenship indicates a Connecticut regulator and state banking commissioner entered a consent order barring Blankenship from the state industry, revoking his registration permanently.
Prior to this decision, Blankenship had been accused of criminally writing a $35 check to an Irvine, CA supermarket in 1982 with insufficient funds in the account. The case was dismissed after Blankenship paid a $100 fine and $35 restitution to the supermarket.
In 1997, a $2,754.00 lien was filed against Blankenship stemming from a non-payment dispute at a Virginia Beach property (ServPro of VA Beach, Inc.). The judgment is still outstanding.
The Law Offices of Jonathan W. Evans & Associates has represented many clients in claims similar to these; even when an accused broker is broke, there may be ways to recover losses. If you suspect or have discovered such activity that has proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.