Dawn Bennett Guilty of $20 Million Ponzi Scheme

Posted on Thursday, November 1st, 2018 at 10:59 am    

Erez Law is currently investigating former Western International Securities, Inc. CEO Dawn Bennett (CRD# 1567051) regarding a fraud that raised more than $20 million from at least 46 investors through the unregistered DJBennett convertible and promissory notes. It is alleged that elderly and financially unsophisticated investors were targeted 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%.

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. Bennett faces 20 years in prison for wire fraud, five years in prison for securities fraud, 20 years for each of four counts of securities fraud, and a 30 years each for bank fraud and for 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 allegedly 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%. 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.” This investigation is currently pending.

In September 2015, The U.S. Securities and Exchange Commission (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 13 customer complaints between 1995 and 2016, one of which was denied, according to her CRD report:

November 2016. “Unsuitable recommendations.” The customer is seeking $100,000 in damages and the case is currently pending.

August 2016. “Unsuitability.” The customer is seeking $274,000 in damages and the case is currently pending.

July 2016. “Unsuitability.” The customer is seeking $100,000 in damages and the case is currently pending.

May 2016. “Misrepresentation & Unsuitability.” The customer is seeking $100,000 in damages and the case is currently pending.

February 2016. “Unsuitability.” The customer is seeking $99,999 in damages and the case is currently pending.

January 2016. “Unsuitability.” The customer is seeking $499,999 in damages and the case is currently pending.

July 2015. “Claimants alleges a lack of diversifcation (sp) in portfolio during the period Nov 2010 through May 2014.” The customer sought $16,944 in damages and the case was settled for $15,801.15.

March 2015. “Misrepresentation.” The case was settled for $65,500.

February 2014. “breach of the general duties of reasonable care, honesty and disclosure; recommending unsuitable investments in violation of Fla. Stat. Section 517.301; common law fraud; breach of fiduciary duty; negligence.” The client was awarded $850,000 in damages.

March 2013. “Following a relationship over fifteen years, client, a non-practicing attorney, filed a claim alleging that, despite her approval on all transactions in her accounts during the period 2006-2012, certain transactions violated a duty owed to her. The records show the client authorized the transactions in the non-discretionary accounts. We believe the allegations are without merit and deny the claim in its entirety.” The client sought $1,625,760 in damages and was granted $100,000.

February 2013. “Despite their financial sophistication and wealth of experience, clients, who authorized all trades before they were entered, allege breach of various duties arising from “Unsuitable” transactions from 2010-2012, a period that was five years after they began their relationship. Because the allegations are without merit and are brought in bad faith, we intend to seek a dismissal of the arbitration and the awarding of all legal and arbitration related fees.” The client sought $1,935,230 in damages and was granted $200,000 in damages.

June 1995. “Client alleges the margin trading account’s record of realized profit & loss was misrepresented; the nature of stocks held for investment purposes in the trading account was misrepresented; that the margin account was excessively trading; and that the maintenance of the margin account was unsuitable given the magnitude of losses and suffered therein. client seeking damages in the amount of $1,151,715.” The case was settled for $450,000.

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, 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.

Disclaimer: Clients are responsible for costs. Contingency fee is calculated before deducting costs incurred in the case.