SEC Charges 1st Global Capital LLC and Former CFO with Fraud

1st Global Capital

In August 2019, the Securities and Exchange Commission (SEC) charged 1 Global Capital LLC’s former chief financial officer, Alan Heide, with defrauding retail investors. The SEC’s complaint Heide with violations of the antifraud provisions of the federal securities laws. According to the SEC, Heide agreed to settle the SEC’s charges as to liability, without admitting or denying the allegations, and agreed to be subject to an injunction, with the court to determine the penalty amount at a later date.

The U.S. Attorney’s Office for the Southern District of Florida also announced criminal charges against Heide.

1 Global Capital LLC was a Florida-based cash advance company that allegedly fraudulently raised more than $322 million from 3,600 investors between 2014 and 2018. 1st Global Capital (also known as 1st Global Capital Financial Services) and 1st West Capital filed for bankruptcy in July 2018 following a SEC investigation into an alleged $283 million loan fraud. Investors are classified as creditors and will not receive a distribution of any assets unless approved by the bankruptcy court. If distributions do occur, they will likely be cents on the dollar and take many years to come to fruition.

The SEC and the Southern District of Florida U.S. Attorney’s office opened an investigation into alleged securities laws violations, including the offer and sale of unregistered securities, the sale of securities by unregistered brokers, and by the commission of fraud in connection with the offer, purchase and sale of securities. The SEC is investigating whether the loans sold to retail investors required registration and whether the loans were sold to investors through unregistered brokers.

The United States Attorney opened a parallel investigation into the business practices of 1st Global Capital and 1st West Capital, affiliated small business lenders in Hallandale, Florida.

In August 2018, the SEC charged 1 Global Capital LLC and former CEO Carl Ruderman with fraud.

In July 2018, the SEC charged Henry “Trae” Wieniewitz, III (CRD# 4469542) for his allegedly unlawful sales of 1 Global Capital LLC’s securities.

According to the SEC, Ruderman and Wieniewitz have consented to final judgments.

According to the SEC’s complaint in August 2019, “although 1 Global promised investors profits from its short-term cash advances to businesses, the company used substantial investor funds for other purposes, including paying operating expenses and funding Ruderman’s lavish lifestyle. The SEC alleges that Heide, a certified public accountant, for nine months regularly signed investors’ monthly account statements that he knew overstated the value of their accounts and falsely represented that 1 Global had an independent auditor that had endorsed the company’s method of calculating investor returns.”

According to the SEC statement by Eric I. Bustillo, Director of the SEC’s Miami Regional Office, “Heide’s misrepresentations gave false comfort to investors, allowing them to be duped to invest in 1 Global’s securities… We allege that as 1 Global’s CFO, Heide played a significant role in 1 Global’s fraud by overstating the value of investors’ accounts and their rates of return and falsely representing the role of an auditor.”

According to the SEC, “This is the third action the SEC has brought involving the 1 Global fraud. In the first case, Ruderman consented to a final judgment against him in which he was permanently enjoined from violating the antifraud, securities registration, and broker-dealer registration provisions of the federal securities laws, and held liable for disgorgement of approximately $32 million in ill-gotten gains and a civil penalty of $15 million. As part of the judgment, Ruderman agreed to turn over approximately $750,000 in cash, as well as 50 percent of the equity in his multimillion-dollar condominium. Additionally, in July, the SEC filed a settled action charging a 1 Global external sales agent, Wieniewitz, with securities and broker-dealer registration violations. Wieniewitz agreed to a final judgment holding him and his former company jointly and severally liable for more than $3.5 million in disgorgement and a $150,000 civil penalty. He was previously enjoined from violating the securities registration and broker-dealer registration provisions of the federal securities laws.”

Wieniewitz was registered with Taylor Capital Management Inc. in Knoxville, Tennessee from 2010 to January 2016. He has been unregistered with FINRA since that time, but is alleged to have been operating his own firm Wieniewitz Financial (Wieniewitz Wealth Management), which is based in Knoxville, Tennessee.

In July 2019, the SEC barred Wieniewitz following allegations that from no later than February 2016 through July 2018, the Wieniewitz in this action served as unregistered brokers on behalf of Woodbridge Group of Companies, LLC and its affiliates and 1 Global Capital, LLC. The Defendants raised almost $64.4 million from the offer and sale of unregistered securities to more than 630 retail investors located throughout the United States. According to his BrokerCheck profile, “The Defendants earned more than $3.5 million in transaction-based sales commissions. The Defendants utilized several marketing techniques, including advertising on television, radio, newspapers, email, social media, and pitching investors at in-person meetings, routinely touting Woodbridge’s and 1 Global’s securities as ‘safe and secure’. Unbeknownst to the Defendants’ customers, many of whom had invested their retirement savings, Woodbridge was actually operating a massive Ponzi scheme, raising more than $1.2 billion before collapsing in December 2017 and filing for bankruptcy. Once Woodbridge filed for bankruptcy, investors stopped receiving their monthly interest payments and to date have received only a small amount of their principal back through the bankruptcy process. Unbeknownst to Defendants’ 1 Global investors, 1 Global and its chairman and chief executive officer were syphoning off millions in investor funds to fund a lavish lifestyle and operate unrelated businesses. 1 Global filed for bankruptcy in July 2018. At all relevant times, the Defendants were not registered as broker-dealers with the Commission or associated with a registered broker-dealer. Woodbridge’s and 1 Global’s securities offerings were not registered with the Commission and there was no applicable exemption from registration for these offerings.”

In May 2019, the Alabama Securities Commission issued a Cease & Desist Order to Respondents alleging that Wieniewitz, an unregistered agent, offered and sold securities to Alabama residents, and he sold promissory notes through his business, Wieniewitz Financial, LLC and Wieniewitz Wealth Management, LLC.

It is alleged that Wieniewitz recommended 1st Global notes to conservative investors, touting their safety and described them as low-risk, short-term investment alternatives with a guaranteed return of 7-9% or more and with no risk of default. It is alleged that Wieniewitz never disclosed to his clients or potential clients that 1st Global notes were not registered or that the company was being investigated for securities fraud.

It is alleged that customers across the country were offered cash advances through a network of unregistered brokers and financial advisors. The two companies provided small businesses with unsecured, short-term commercial financing, averaging 9 months and at a yield of 10%, and memorialized by promissory notes. The companies provided quick, small business loans of up to $500,000 and serve a variety of business sectors, including automotive, e-commerce, events, franchise, hospitality, restaurant and transportation. The promissory notes were marketed as safe, short term, fixed income investments that could generate above average rates of returns for investors.

Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, brokerage firms around the country may be liable for investment or other losses suffered by its customers.

Erez Law represents investors in the United States for claims against brokers and brokerage firms for wrongdoing. If and have experienced investment losses, please call us at 888-840-1571 or complete our contact form for a free consultation. Erez Law is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies on a contingency fee basis.

"*" indicates required fields

Please do not include any confidential or sensitive information in this form. Submitting this form does not create an attorney-client relationship.

Author: Jeffrey Erez

The founder of Erez Law, Jeffrey Erez, focuses exclusively on securities arbitration and litigation. Mr. Erez passionately believes in representing aggrieved investors and obtaining justice for his clients through litigation.