In May 2020, FINRA censured Western International Securities and fined the firm $325,000 related to its compliance procedures. Western International Securities also agreed to hire an independent consultant to review its compliance efforts and recommend changes that the broker-dealer should put into place. According to the Acceptance, Waiver & Consent, “During the Relevant Period, Western failed to timely disclose 163 liens, judgments and bankruptcies on 52 of its registered representatives’’ Forms U4. The untimely-disclosed liens and judgments totaled more than $5.6 million. Western was informed of some of these financial events through its own reviews of background check reports, wage levies and annual compliance questionnaires, and, beginning in May 2015, from communications from FINRA’s Registration and Disclosure Department (RAD), yet the Firm was between four months to more than six years late in disclosing them.” Additionally, Western International Securities failed to establish, maintain, and enforce a supervisory system, including written supervisory procedures (WSPs), reasonably designed to ensure the timely reporting of disclosable events.
In July 2019, Western International Securities, Inc. CEO and former operator of Bennett Financial Services Group in Chevy Chase, Maryland, Dawn Bennett (CRD# 1567051) was sentenced to 20 years in federal prison followed by five years of supervised release for her conviction in connection with the Ponzi scheme that she operated. The investigation found that Bennett raised more than $20 million from at least 46 investors through the unregistered DJBennett convertible and promissory notes between December 2014 and April 2017.
In August 2019, she appealed that conviction and sentence.
Bennett was charged with 17 federal charges including conspiracy, securities fraud, wire fraud, bank fraud, and making false statements on a loan application and received the maximum sentence in addition to five years of supervised probation upon her release, and she was ordered to pay restitution of $14.5 million and to forfeit $14.3 million.
Bennett targeted elderly and financially unsophisticated investors by materially misrepresenting the company’s profitability and by claiming the company had the resources to pay annual rates of return as high as 15% via convertible or promissory notes for investments in her internet luxury sportswear clothing business. Many investors invested a significant portion of their retirement accounts and many lose their life’s savings due to this fraud.
Bradley Mascho also pled guilty to conspiracy to commit securities fraud and to making a false statement. Mascho faces a maximum of 10 years in prison. As part of his plea agreement, Mascho is ordered to pay full restitution to victims, which is at least $5.7 million, minus amounts repaid with money not derived from his criminal conduct, but in no event less than $3.6 million.
Bennett was registered with Western International Securities, Inc. Washington, DC from 2009 to 2015 when she was “permitted to resign” regarding, “Firm decision following discovery of promissory notes with firm customers by registered representative’s company without disclosure to the firm.” Bennett was the founder and owner of Defendant DJB Holdings, LLC, a Washington D.C.- based retail sports apparel business, and a former radio host of “Financial Myth Busting with Dawn Bennett.”
In October 2018, Bennett was convicted of 17 charges related to a $20 million Ponzi scheme. Bennett was found guilty of all charges, including conspiracy, securities fraud, wire fraud, bank fraud and making false statements on a loan application.
In August 2017, The Securities and Exchange Commission (SEC) charged Bennett with running a Ponzi Scheme. The SEC alleged that between December 2014 and July 2017, Bennett raised more than $20 million from at least 46 investors through the unregistered offering of DJBennett convertible and promissory notes, by making materially false and misleading statements and omissions concerning, among other things, DJBennett’s financial condition and operating performance, the risks associated with the investment, and the intended use of investor proceeds.
Bennett had lost a significant portion of her financial advisory clientele and her company DJBennett was not profitable. Additionally, it is alleged that Bennett accumulated a variety of personal financial obligations, but she continued to spend considerable sums to fund her extravagant lifestyle. To finance her company DJBennett, Bennett told investors that the funds would be used for corporate purposes, however it is alleged that she used the proceeds for a variety of improper purposes, including payments to earlier investors in the nature of Ponzi scheme, to service debt, and a variety of luxuries, such as jewelry, high-end clothing, mystics, and a $500,000 annual lease for a luxury suite at AT&T Stadium in Dallas. She also lied about DJBennett’s extensive liabilities and the risks associated with the investment.
The SEC also alleged that Bennett employed a variety of other fraudulent devices to further the scheme and to avoid detection. “Among other things, Bennett lied to Broker Dealer 1 and a regulator about her ongoing note sales; fraudulently obtained several loans by submitting fabricated brokerage statements that inflated her net worth and then used the proceeds, in part, to make interest and redemption payments; and replaced previously sold convertible notes with nine-month promissory notes in an apparent attempt to have the promissory notes deemed loans.”
In March 2017, a former client of Bennett won a $1 million FINRA arbitration regarding the client’s investment in the SPDR Gold Shares exchange traded fund. The former client alleged the following causes of action: breach of the general duties of reasonable care, honesty and disclosure; recommending unsuitable investments in violation of Fla. Stat. §517.301; common law fraud; breach of fiduciary duty; failure to supervise; and negligence. The panel found that Bennett and Western International Securities, Inc. were liable for recommending unsuitable investments and failure to supervise and were ordered to pay to the claimant the sum of $763,740 in compensatory damages plus interest, as well as $26,620.00 in expert witness fees, a $375 claim filing fee, and $252,034.00 in attorneys’ fees.
In November 2016, “Bennett was named a respondent in a FINRA complaint alleging that she has failed to provide information and documentation requested by FINRA in an investigation involving potentially serious violations, such as conversion, fraud, and private securities transactions. The complaint alleges that on four separate occasions, Bennett failed to appear and provide testimony requested by FINRA.”
In September 2015, The SEC barred Bennett and sanctioned her to pay $600,000 in civil and administrative penalties and fees and $556,102 in disgorgement. According to the statement, the SEC investigation found that between 2009 and February 2011, Bennett “made material misstatements and omissions regarding assets that were purportedly ‘managed’ for investors and regarding investment returns for the purpose of retaining existing customers and attracting new customers.” Additionally, Bennett and Western International Securities, Inc. “made additional misstatements in an effort to obstruct the investigation and to ‘cover up’ their prior fraud.” It is alleged that Bennett and Western International Securities, Inc. overstated their managed assets by at least $1.5 billion, to inflate their “profile and prestige” to a local radio station, a national financial ranking service, and in other advertisements and communication with prospective clients. The claim also alleges that Bennett touted her “firm’s highly profitable investment returns” that placed Western International Securities, Inc. in the “top 1%” of firms worldwide; however, she did not disclose that the returns were of a model portfolio and not of actual customer returns. The investigation allegedly found that Bennett and Western International Securities, Inc. falsely claimed to have given advice regarding $1.5 billion in corporate assets.
Bennett has been the subject of 38 customer complaints between 1995 and 2019, 21 of which were settled, three were awarded judgments, one was closed without action and one was denied, according to her CRD report. A recent sampling of complaints include:
- April 2019. “Unsuitable Recommendations; Fraud; Breach of Fiduciary Duty.” The customer is seeking $100,000.01 and this case is currently pending.
- March 2019. “Offer and Sale of an Unregistered Securities; Unsuitable Recommendations, Misrepresentations and Omissions of Material Fact; Fraud; Breach of Fiduciary Duty.” The customer is seeking $427,538 and this case is currently pending.
- February 2019. “Negligence; Breach of Fiduciary Duty.” The customer sought $250,000 in damages and the case was settled for $22,500.
- February 2019. “Breach of Fiduciary Duty; Fraud; Unsuitable Recommendations, Misrepresentations & Omission of Material Fact.” The customer is seeking $2,444,388 in this pending complaint.
- November 2018. “Breach of Fiduciary Duty; Fraud; Unsuitable Recommendations, Misrepresentations & Omission of Material Fact.” The customer is seeking $150,000 in this pending complaint.
- November 2018. “Breach of Fiduciary Duty.” The customer is seeking $500,000 in this pending complaint.
- September 2018. “Unsuitable recommendations and misrepresentation.” The customer sought $1,200,000 and the case was settled for $475,000.
- April 2018. “Unsuitable recommendations.” The customer is seeking $800,000 in damages.
- February 2017. “Unsuitable recommendations.” The customer sought $4 million in damages and the case was settled for $1.25 million.
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, Western International Securities, Inc. may be liable for investment or other losses suffered by Bennett’s 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.