A Connecticut-based investment advisor defrauded a retired couple by misleading them on his trading strategies and losing almost all of their retirement savings within 10 months, according to new charges from the SEC.
Although Hai Khoa Dang had last worked at a registered broker/dealer or advisor in 2006 (according to FINRA BrokerCheck, he worked at Investors Capital Corp), he continued to act as an unregistered advisor for the couple, according to an SEC complaint.
The SEC alleged that after 2006, Dang set up an arrangement in which he would continue to advise the couple, but an unnamed advisor still working at his previous firm would act as the couple’s official registered representative, enacting trades directed by Dang.
According to the SEC, Dang never revealed that he was no longer with a registered broker/dealer, and that his own securities licenses and registration had lapsed. But in 2017, the registered rep. could no longer conduct Dang’s business, so he needed to find an alternative way of managing the couple’s brokerage accounts, according to the commission.
At this point, Dang suggested the couple open self-managed accounts at an online discount brokerage firm and supply him with the usernames and passwords so he could manage their investments (the online brokerage firm they chose does not allow investment advisors to make trades on behalf of customers). The couple agreed to the idea on the basis that Dang would conservatively invest most of their retirement portfolio with a small portion invested in stock options. They also asked him to retain at least $250,000 in cash equivalents in case of market downturns, according to the SEC. Dang opened the accounts and transferred the couple’s $2.2 million in retirement savings into them.
“Contrary to Client A’s and B’s instructions, Dang deviated sharply from the strategy he had proposed to his clients, which was an overall conservative investment strategy under which only a small amount of funds would be allocated to options trading,” the complaint read. “Dang’s aggressive—and unauthorized—options trading was disastrously unprofitable and quickly depleted the clients’ accounts.”
According to the complaint, from February to December 2018, the retirement accounts fell from $2.2 million to about $145,000; nearly one year later, their savings were depleted to $27,000. The retired couple never actually made any trades on the online brokerage service, though they periodically checked on their investments and questioned Dang why their value was depleting.
“On some occasions, Dang told his clients their losses were a result of the current political climate. On other occasions, Dang stated that the balances they saw on paper did not reflect the actual value of their holdings,” the complaint read. “None of Dang’s explanations were true. The losses were real and they were attributable to Dang’s unauthorized options trading.”
The SEC filed its complaint in federal court in Connecticut, seeking disgorgement, a civil penalty and a permanent injunction.
Dang could not be reached for comment.