☷Philadelphia Woman Sentenced to 109 Months in Prison for $100 Million Securities Fraud Scheme
Federal Bureau of Investigation ( By Press Release office)
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Philadelphia Woman Sentenced to 109 Months in Prison for $100 Million Securities Fraud Scheme NEWARK , N . J . – An investment fund manager was sentenced today to 109 months in prison for orchestrating a $100 million securities fraud scheme , U . S . Attorney Philip R . Sellinger announced . Brenda Smith , 61 , of Philadelphia , previously pleaded guilty by videoconference before U . S . District Judge Madeline Cox Arleo to Count Seven of an indictment charging her with securities fraud . Judge Arleo imposed the sentence today in Newark federal court . According to documents filed in this case and statements made in court:Smith managed and controlled Broad Reach Capital LP , a pooled investment fund/hedge fund that was established in February 2016 and was open to accredited investors with a minimum investment of $1 million . From February 2016 through August 2019 , Smith orchestrated a scheme in which she made misrepresentations to investors and promised that she would invest their funds in particular trading strategies that Broad Reach Capital was allegedly optimally situated to execute . Smith referred to these strategies as dividend capture , VIX Convergence , and opportunistic trading . Smith misrepresented the success and performance of Broad Reach Capital to investors and prospective investors . She touted Broad Reach Capital as a trade - focused investment fund that was highly liquid and employed a robust risk management program . Smith distributed written materials about Broad Reach Capital to investors and prospective investors that included purported historical performance information , such as claimed annual returns of over 33 percent in 2017 and positive monthly returns in 2018 . In fact , the total cash and securities in the Broad Reach Capital bank and brokerage accounts decreased from approximately December 2016 through June 2019 . For example , the written materials claimed that Broad Reach Capital had a 1 . 76 percent return in February 2018 when in reality , Broad Reach Capital’s brokerage accounts lost approximately 50 percent of their value . To lull investors and induce them to continue investing , Smith provided monthly account statements to investors that falsely showed that their investments were safe and earning significant returns . Smith also falsely represented that she was personally invested in Broad Reach Capital and provided a fictitious account statement to at least one investor . Over the course of the scheme , Smith collected more than $100 million of cash into Broad Reach Capital from approximately 40 investors . At its peak , however , the value of cash and securities in the Broad Reach Capital bank and brokerage accounts did not exceed approximately $32 million . Instead of investing the money as she promised , Smith transferred tens of millions of dollars out of Broad Reach Capital to entities she controlled for purposes inconsistent with the trading strategies , including more than approximately $10 million for mineral mining operations and approximately $2 million for American Express credit card bills . When investors requested redemption of their investments , Smith diverted other investors’ funds to pay the requested redemption amounts . In addition to the prison term , Judge Arleo sentenced Smith to three years of supervised release and ordered her to pay restitution of $47 . 2 million . The U . S . Securities and Exchange Commission ( SEC ) Philadelphia Regional Office previously filed a civil complaint against Smith based on the same conduct . U . S . Attorney Sellinger credited special agents of the FBI Philadelphia Division , under the direction of Special Agent in Charge Jacqueline Maguire , and special agents of the U . S . Attorney’s Office , under the direction of Special Agent in Charge Thomas Mahoney , with the investigation leading to today’s sentencing . She also thanked the U . S . Securities and Exchange Commission’s Philadelphia Regional Office , under the direction of Co - Acting Regional Directors Scott Thompson and Joy G . Thompson , for its assistance . The government is represented by Assistant U . S . Attorney Osmar J . Benvenuto , Deputy Chief of the Criminal Division of the U . S . Attorney’s Office in Newark .
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