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Former Wells Fargo Financial Advisor John Schmidt Barred by the SEC

Posted on Thursday, March 21st, 2019 at 2:39 pm    

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In March 2019, former Wells Fargo financial advisor John Schmidt (CRD# 708094), who was recently charged with running a $1 million Ponzi Scheme, was barred by the Securities and Exchange Commission (SEC).

In December 2018, Schmidt was charged with 128 felony counts, including:

  • 124 counts of Forgery
  • Two counts of Theft From an Elderly or Disabled Adult >$150,000
  • One count of Telecommunications Fraud >$150,000 but <$1,000,000 One count of Fraud or Deceit by Investment Advisor >$150,000

According to a statement from the office of the prosecuting attorney of Montgomery County, Ohio, Schmidt operated Schmidt Investment Strategies Group on Paragon Road in Washington Township, Ohio, while he was employed by Wells Fargo Advisors Financial.

“During this time, the defendant stole money from investment accounts in order to cover for stolen money in other investor’s accounts – a “Ponzi” scheme. The defendant also created and falsified financial statements to investors in an effort to cover for the missing investments. In addition, the defendant sold securities without the knowledge or authorization of the investors and the defendant received commissions on those transactions of nearly a quarter‐million dollars,” according to the statement.

A federal civil lawsuit has also been filed by the Securities and Exchange Commission.

Schmidt 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.”

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. 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.”

Schmid 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 five customer complaints between 2007 and 2018, according to his CRD report. Recent complaints are regarding:

January 2018. “Representative for client alleges that funds were misappropriated from his client’s accounts. (2/16/2011-5/21/2016).” The case was settled for $280,000.

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 is currently pending.

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.

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 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.