California RIA charged for $140K Client Scam

SEC charged California RIA and the investment advisor, Craig Rumbaugh for cheating his clients out of $140K

On Thursday, the SEC (Securities and Exchange Commission) charged Craig Rumbaugh, an investment advisor and two of his California based firms for defrauding the clients. According to the charges, Rumbaugh is alleged for convincing eight advisory clients for investing more than $3 million with another investor. This investor is actually running a Ponzi scheme into real estate investment. The scam is worth $26 million.

Rumbaugh received 5% commissions on the funds that were raised from his clients. By calculating the commissions earned by luring these 8 clients, the total comes to $140,000. SEC further claimed that Rumbaugh hid his intent to profit from his clients and tried to scam his clients with their investments.

A case has been filed against Rumbaugh and his company, Rumbaugh Financial and Desert Strategic Equity with the US District Court for the Central District of California.

Between August 2015 and June 2016, Rumbaugh advised clients to invest in promissory notes offered by investor Susan Werth and her firms, Corporate Mystic and Commercial Exchange Solutions, the SEC said. In October 2018, the SEC filed an emergency, injunctive action against Werth for operating a fraudulent securities scheme. Werth has since pled guilty to wire fraud in an ensuing criminal action and is scheduled to be sentenced in October of this year.

The SEC reported that among all the clients, three of Rumbaugh’s clients have lost more than $600,000 in total after the Werth’s Ponzi scheme died.

Moreover, Rumbaugh even lied to his clients about the interest rate that Werth’s companies offered. He showed an interest rate between 5% to 10% range to his clients where Werth offered 30% and more interest.

Rumbaugh paid lesser to his clients after receiving the correct interest amount from Werth which was much higher than what Rumbaugh and his companies repaid clients. SEC claimed that the remaining amount was kept by Rumbaugh.

Rumbaugh did not agree to make any remark when requesting comments on the charges. The SEC report suggested that Rumbaugh’s RIA, Rumbaugh Financial has about $1 million in assets and around 20 clients at the time of reporting. Rumbaugh is also managing a trust. He also recommended investments from clients for his trust often. Among all the clients of Rumbaugh, most of them were not even accredited investors and knew nothing about investment.

 

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