Aggregated News From Investment Management Regulators

Aequitas Management, LLC, et al. (Release No. LR-24805; Apr. 24, 2020)

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On April 13, 2020, the U.S. District Court for the District of Oregon entered final judgments on consent against an Oregon-based investment group and its three top executives for defrauding investors out of hundreds of millions of dollars. The SEC has also barred the executives from the securities industry in separate administrative proceedings.

The SEC’s complaint, filed on March 10, 2016, alleged that Aequitas Management LLC and four affiliates defrauded more than 1,500 investors nationwide into believing they were making health care, education, and transportation-related investments when their money was in fact being used primarily to cover operating losses and to pay earlier investors in a Ponzi-like fashion. The SEC’s complaint further alleged that CEO Robert J. Jesenik and executive vice president Brian A. Oliver were aware of Aequitas’s calamitous financial condition yet continued to solicit millions of dollars from investors to pay the firm’s ever-increasing expenses and attempt to stave off the impending collapse of the business. Former CFO N. Scott Gillis allegedly concealed the firm’s insolvency from investors and was aware that Jesenik and Oliver continued soliciting investors so that Aequitas could pay operating expenses and repay earlier investors with money from new investors.

The defendants each consented to the entry of a final judgment imposing conduct-based injunctions prohibiting them from soliciting anyone to purchase or sell a security and prohibiting them from participating in the issuance, offer, or sale of any security of an entity they control. The final judgments also enjoin the defendants from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, Section 17(a) of the Securities Act of 1933, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Aequitas entities, Jesenik, and Gillis consented to the entry of final judgment without admitting or denying the SEC’s allegations. The final judgment against the Aequitas entities, which were placed into a receivership, requires them to pay $453,000,000 in disgorgement with $87,048,072 prejudgment interest to be deemed satisfied by the amounts collected by the receiver. The final judgments also require Jesenik to pay $759,502 in disgorgement with $181,304 prejudgment interest, and a $625,000 civil penalty, Oliver to pay $190,502 in disgorgement with $45,426 prejudgment interest, and Gillis to pay a $300,000 civil penalty. The final judgments prohibit Jesenik, Oliver, and Gillis from serving as officers or directors of any public company. Oliver was also charged criminally for his conduct. He pled guilty but has not yet been sentenced.

In a settled administrative proceeding, Jesenik, Oliver, and Gillis were barred from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical ratings organization. Gillis agreed to be permanently suspended from appearing and practicing before the SEC as an accountant, which includes not participating in the financial reporting or audits of public companies.

While the Aequitas receivership continues, with the entry of the judgments and institution of the orders, the SEC’s litigation has concluded.

Regulator Information

Abbreviation: SEC
Jurisdiction: United States

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