A barred advisor raised more than $2.4 million from investors to fund an online shopping application, but spent more than $400,000 of it gambling at a local casino, says the SEC.
The regulator charged Dragon-Click Corporation, its president Isaac Grossman, his wife Adriana Grossman and her unregistered investment advisor Dragon Management in connection with an ongoing fraud scheme that the SEC says bilked 26 mostly retiree-aged investors. It also obtained an emergency asset freeze.
Grossman falsely claimed that investors would make huge profits, tripling or quadrupling their money, the regulator says. For example, in March 2016, Grossman solicited an 80-year-old man by telephone, telling him that Dragon-Click would revolutionize shopping on the internet and that his funds would go for final development of the technology, the regulator says. The man purchased $50,000 worth of stock with a personal check, before Grossman collected two more investments for a combined $22,500, court documents show.
In 2014, Grossman told a 75-year-old man that he hoped Dragon-Click would be sold to Google and that investors stood to triple or quadruple investments in less than six months, the regulator says.
Instead of investing the money into development and marketing for the company, Grossman and his wife misused at least $1.3 million to pay for personal living expenses, including his gambling habits, as well as, the purchase of luxury vehicles and jewelry, the regulator says.
Grossman misappropriated roughly $426,000 gambling, primarily through slot machines and table games at a Florida casino, according to the SEC charges. At least $500,000 in cash was used for withdrawals for personal use, $29,000 for automobile lease payments and $6,000 in jewelry, the court documents show.
Adriana Grossman spent $35,000 gambling, $98,000 on a Chevrolet Corvette and a Chevrolet Tahoe, $67,000 on mortgage payments and $51,000 on jewelry, including a 3.8 carat yellow diamond, courts documents show.
An attorney for Grossman was not listed in the court documents.
Grossman has 10 disclosures on his FINRA BrokerCheck records, including a pending dispute alleging negligence, breach of fiduciary duty and other violations. “The client claims that the broker misled him into purchasing concentrated speculative securities and management failed to supervise the account in order to prevent the losses incurred by these purchases,” according to the BrokerCheck allegations. The customer is seeking $196,245, per BrokerCheck.
Six of the 13 firms where Grossman has been registered are now expelled from FINRA, per BrokerCheck. Grossman was discharged from one firm, Texas-based Basis Financial, in 2010. “Mr. Grossman unprofessionalism and violation of Basis business standards led to his termination,” according to the BrokerCheck allegations. “Clients also alleged that Mr. Grossman misled them into purchasing securities on margin.”
Basis Financial was expelled from FINRA in 2012, per BrokerCheck.