The SEC charged former Forefront Capital Markets broker Demitrios Hallas with recommending daily leveraged exchange-traded funds (ETFs) and notes (ETNs) without a reasonable basis as to their suitability and without understanding the products, and for misappropriating over $170,000 from a client through the use of blank checks.
The complaint states in addition to the misappropriated $170,000+, Hallas' actions generated $128,000 worth of commissions and fees, and a net loss of approximately $150,000 to clinet.
According to the complaint, Hallas engaged in a fraudulent scheme in which he offered to make investments on a customer's behalf using a series of blank, but signed checks the customer provided to him, but instead, "blatantly misappropriated" the funds for personal use.
The findings indicate Hallas received six of the dozen checks while associated with firms Santander Securities LLC, Forefront Capital Markets, and PHX Financial, Inc., while the other half-dozen checks were received after Hallas left PHX and was no longer associated with any broker-dealer.
In all, the complaint alleges, Hallas fraudulently misappropriated $170,750 from his client, mostly comprised of retirement savings.
All five customers that are part of the complaint are described in the document as having "limited or no investment experience," and held accounts—four of which were IRAs—in which Hallas made "all of the trading decisions," even though Hallas possessed no discretionary authority, and, thus, needed customer authorization before purchasing or selling securities in the accounts.
The complaint also alleges that Hallas pre-filled forms that he asked his customers to sign during brief meetings and that the customers did not realize that certain information Hallas had entered on the form—such as income, net worth, risk tolerance levels, and investment objectives—were inaccurate and/or inflated.
Hallas allegedly purchased and sold ETFs and ETNs in his customers' accounts while "knowingly or recklessly" disregarding that the products were unsuitable for these customers. The complaint alleges that Hallas had no reasonable basis for recommending daily leveraged ETFs and ETNs, and, furthermore, that Hallas failed to conduct adequate due diligence on daily leveraged ETFs and ETNs to the point that Hallas did not adequately understand how the products worked or the risks involved in transacting them.
FINRA previously suspended Hallas (CRD #4199832) for refusing to cooperate with an investigation, and, in a separate action, issued a fine and order of restitution settling allegations that Hallas unsuitably recommended that a customer surrender her fixed annuity to invest in a bond fund without first ascertaining whether his client would incur surrender charges for liquidating the annuity.
A similar customer dispute in Hallas' BrokerCheck report, since settled, alleged unethical practices with the exchange of a variable annuity (VA) that resulted in a taxable event; former employer Chase Investment also filed an employment separation after allegations disclosure stating that the firm discharged Hallas for job performance, including complaints alleging unauthorized trades and failure to disclose fees.
If you have invested with Demitrios Hallas or with any broker or financial adviser who has misappropriated funds for personal gain, or whose unsuitable recommendations of complex products that plainly do not correspond to your specific investment objectives or risk tolerance level has proven harmful to your investment through overpayment of excessive commissions and fees or a loss of principal, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.