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Investment Losses with Former Morgan Stanley Broker Elias Herbert Hafen

Posted on Wednesday, September 11th, 2019 at 8:33 pm    

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Erez Law is currently investigating former Morgan Stanley broker Elias Herbert Hafen (CRD# 867068) regarding misappropriation that led to investor losses. Hafen was registered with Wells Fargo Clearing Services, LLC. in New York, New York from March to September 2018 and previously with Morgan Stanley in New York, New York from 2009 to 2018, when he was terminated regarding, “Mr. Hafen admitted to entering into financial arrangements with clients that were not approved by the firm.”

In March 2020, Hafen was barred by the Securities and Exchange Commission (SEC). Hafen entered into a final consent judgment with the SEC and agreed to a permanent bar from the securities industry.  

In February 2020, United States Attorney for the Southern District of New York sentenced Hafen to 30 months in prison for having defrauded his clients out of more than $1.6 million. Hafen was also sentenced to three years of supervised release, ordered to pay $745,000 in restitution, and ordered to forfeit $806,750.

In February 2019, FINRA barred Hafen after he failed to respond to FINRA request for information.

In September 2019, the SEC filed a complaint against Hafen alleging that from July 2011 through April 2018, Hafen “engaged in a scheme to defraud his clients. This scheme involved Hafen convincing his retail clients that he had access to a purported investment opportunity outside the financial institution where he worked. He advised clients that the supposed investment would pay an annual six percent return and had little risk. Hafen convinced his clients to take their money out of the Financial Institutions – including liquidating stock holdings and personal retirement accounts – deposit that money into their personal bank accounts, and then transfer or wire the money to Hafen’s personal bank account. Once Hafen had the money from his clients, he pocketed it, using it, not for any investments, but for his own personal purposes. While some of the victims received some or all of their money back, most of the money was never repaid. During the seven year scheme, Hafen took more than $1.6 million from 11 victims. Of the total $1.6 million, Hafen has returned approximately $650,000.”

In October 2018, Hafen was barred by FINRA.

In September 2018, Hafen pleaded guilty to defrauding clients out of hundreds of thousands of dollars in a fake investment scheme. 

According to a statement by U.S. Attorney Geoffrey S. Berman,  “Elias Hafen promised his investment clients significant returns in a ‘special’ fund.  With fake statements and guaranteed returns, Hafen was every investor’s worst nightmare.  He never invested his clients’ money and instead used it to fund his own lavish lifestyle.  Today, Hafen admitted his crimes and he will soon likely spend time in prison for his misdeeds.”

“From 2013 until 2018, Hafen engaged in a scheme to defraud at least 11 of his financial advisory clients into believing that Hafen had access to a high-yield investment fund with guaranteed returns, which was not affiliated with the investment bank at which Hafen worked.  On Hafen’s advice, these clients transferred hundreds of thousands of dollars directly to Hafen’s personal bank account for investment in the purported investment fund over the years that Hafen engaged in his fraudulent scheme.  Hafen also created fictitious “Investor’s Statements” bearing the name of a non-existent investment company purporting to detail the status of his victims’ investments.  In reality, however, there was no investment fund at all; Hafen was using the victims’ funds to pay for a lavish lifestyle including custom men’s accessories and an expensive collection of artwork,” according to the release by the U.S. Attorney’s Office of the Southern District of New York.

Hafen has been the subject of three customer complaints, according to his CRD report:

February 2020. “Client alleged financial advisor misappropriated client’s funds – April 2008 to March 2018.” The customer is seeking $50,000 in damages. 

February 2020. “Client complains that the financial advisor defrauded her by encouraging her to send her retirement funds to his personal account for a high yield investment. (5/10/2018-8/21/2018).” The customer is seeking $110,000 in damages. 

September 2018. “Client’s attorney alleged Financial Advisor misappropriated client’s funds – July 2011 – January 2018.” The customer sought $675,000 in damages and the case was settled for $430,000.

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, Morgan Stanley may be liable for investment or other losses suffered by Hafen’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.