The U.S. Securities and Exchange Commission (SEC) is coming down hard on a New Jersey fund manager and his firm. The regulatory agency charged him with defrauding investors by lying about his credentials, concealing trading losses and using investor funds to make Ponzi-like payments to other investors. At the same time, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges against him.

According to the SEC’s complaint filed in federal court in Manhattan, William J. Wells falsely told some investors that he was a registered investment adviser and would invest their money in specific stocks. Instead, Wells and his firm, Promitor Capital Management, are alleged to have invested mainly in high-risk options with poor results that Wells concealed with phony investor account statements that grossly inflated performance.

However, it did not stop here. He further attempted to hide the losses by using funds from new investors to make Ponzi-like payments to earlier investors, the complaint alleges. Wells allegedly raised more than $1.1 million from dozens of investors since 2009, but by late summer, the Promitor fund brokerage accounts held less than $35, with the rest dissipated by trading losses and Ponzi-like payments, or diverted into Wells’s personal bank account, the complaint alleges.

The SEC’s complaint alleges that Wells and Promitor violated antifraud provisions of the federal securities laws and SEC antifraud rules. Wells also was charged with aiding and abetting liability and control person liability for Promitor’s alleged violations. The SEC is seeking permanent injunctions and financial penalties against Wells and Promitor, and return of allegedly ill-gotten gains with prejudgment interest.

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Andrew M. Calamari, Director of the New York Regional Office, said:

We allege that Wells lied to investors about the trades he made and created fake account statements showing positive returns to attract additional investments. When his losses mounted, as alleged in the complaint, Wells stole funds from new investors to pay back old investors in classic Ponzi-like fashion.

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