In October 2021, a former client of Wells Fargo Advisors Financial Network, LLC won an award in a FINRA arbitration for compensatory damages for $2,998,814.81. The complaint was regarding broker John Schmidt (CRD# 708094), who was registered with Wells Fargo Advisors Financial Network, LLC in Dayton, Ohio from 2006 to November 2017 when he was terminated regarding, “Wells Fargo Advisors Financial Network disaffiliated with Mr. Schmidt after allegations of unauthorized money movement between clients, and after the Firm was notified of an allegation of the existence of inaccurate account statements which appear not to have been generated or approved by the Firm.”
The causes of action included misappropriation of funds/conversion, indemnification, and breach of a licensee agreement. The causes of action relate to the claimant’s allegation that, while affiliated with the claimant as an independent contractor and financial advisor, Respondent misappropriated customer funds. Claimant further alleges that it is entitled to reimbursement from Wells Fargo Advisors Financial Network, LLC for any payment made, prior to the hearing in this matter, by the claimant to customers impacted by Wells Fargo Advisors Financial Network, LLC’s actions. The FINRA arbitration hearing was conducted in Cincinnati, Ohio.
In December 2018, Schmidt was convicted of Theft From an Elderly or Disabled Adult (Greater than $150,000), Fraud or Deceit by Investment Adviser, Telecommunications Fraud, Forgery (Spurious), and Forgery (Uttering).
In September 2018, the Securities and Exchange Commission (SEC) charged Schmidt with defrauding retail brokerage customers out of more than $1.16 million in a long-running Ponzi-like scheme. Schmidt was sanctioned to pay a civil and administrative penalty and fine of $235,614. According to the complaint, “From at least 2003 through 2017, Schmidt betrayed his customers’ trust by perpetrating a classic fraudulent scheme: he robbed Peter to pay Paul. Schmidt – acting without customer authorization – repeatedly sold securities belonging to some of his brokerage customers and secretly transferred the sale proceeds to cover shortfalls in the accounts of other customers.”
Schmidt is accused of defrauding retail brokerage customers out of more than $1 million in a long-running Ponzi-like scheme. Schmid is alleged to have sold securities to at least seven of his customers and secretly transferred more than $1 million in proceeds to 10 other customers in a Ponzi-like manner. According to the SEC, “Schmidt accomplished his scheme by making unauthorized sales and withdrawals from variable annuities held by the customers, secretly transferring funds using fraudulent letters of authorization, and issuing fake account statements.”
The SEC alleges that Schmidt accomplished his scheme by making unauthorized sales and withdrawals from variable annuities held by the customers, and then secretly transferring funds using fraudulent letters of authorization, as well as issuing fake account statements. According to the SEC, “Most of the injured customers were elderly with little to no financial expertise and were particularly vulnerable.” Schmidt received more than $230,000 in commissions from these customers.
In March 2018, FINRA barred Schmidt after he failed to respond to FINRA request for information. Schmidt failed to request termination of his suspension within three months of the date of the Notice of Suspension and he was automatically barred from association with any FINRA member in any capacity.
Schmidt has been the subject of eight customer complaints between 2007 and 2018, according to his CRD report. Recent complaints are regarding:
- February 2018. “The representative for the client verbally alleged that moneys were misappropriated from annuity investments owned by the client. (3/16/2007-9/7/2012).” The case was settled for $309,778.20.
- January 2018. “Client verbally alleged that his financial advisor created false account statements and that the financial advisor performed unauthorized liquidations in his variable annuity. (12/1/2006-11/1/2017).” The complaint was settled for $280,000.
- January 2018. “Representative for clients alleged that funds were misappropriated from his client’s accounts. (2/16/2011-5/21/2016).” The complaint was settled for $704,342.67.
- December 2017. “Attorney for client alleges FA has absconded with monies belonging to client. (12/13/2006-10/24/2017).” The case was settled for $1.5 million.
- December 2017. “Attorney for client alleges FA has absconded with monies belonging to client. (2/23/2012-10/27/2017).” The case was settled for $167,059.22.
- October 2017. “Customer verbally alleged that registered representative provided written and verbal misrepresentations regarding the value of the customer’s investments. (3/27/2007-10/27/2017).” This case was regarding variable annuities. The case was settled for $199,443.90.
- October 2017. “Power of attorney for client verbally alleged that unauthorized withdrawals were made from his accounts and his variable annuity by the financial advisor and that his account was traded excessively. (12/1/2006-10/25/2017).” The complaint was settled for $850,000.
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, Wells Fargo Advisors Financial Network, LLC may be liable for investment or other losses suffered by Schmidt’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.