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SEC, Prosecutors Charge JPMorgan Adviser With Embezzling $20 Million In Client Funds

On April 16, the U.S. Securities and Exchange Commission and federal prosecutors in New York City charged a former JPMorgan Chase investment advisor with defrauding clients out of more than $20 million. The New York Times reported JPMorgan officials “alerted federal authorities to the apparent theft and misuse of client money.” The accused, Michael Oppenheim of Livingston, New Jersey, faces both a civil complaint from the SEC and a criminal complaint filed by the United States Attorney’s Office in Manhattan.

SEC v. Oppenheim

The SEC’s complaint charges both Oppenheim and his wife, Alexandra Oppenheim. Michael Oppenheim worked as a “private client advisor” for JP Morgan from 2004 to 2014. The SEC said Oppenheim primarily served “high net worth individuals.” Beginning in approximately 2011, the SEC alleges Oppenheim “deposited approximately $20 million” withdrawn from customer accounts to brokerage accounts under his sole control. The SEC identified at least three customers who were allegedly induced to withdraw money from JP Morgan as part of Oppenheim’s scheme. Oppenheim obtained written permission for these withdrawals, telling customers he planned to “use the money to purchase municipal bonds on their behalf.”

But in fact, the SEC said once Oppenheim transferred his clients’ money to his personal accounts, he simply used them to finance his own stock trading. And he apparently wasn’t very good at it. The SEC said Oppenheim “typically lost the entire amount” of his investments—i.e., his customers’ funds. In 2014 alone, the SEC said Oppenheim lost $14 million through one of his brokerage accounts. The SEC said Oppenheim also transferred client funds to his wife, including at least one wire transfer used to pay off the couple’s home mortgage.

Oppenheim also allegedly covered up his illegal activity by presenting his clients with “false explanations” and fraudulent account statements. He also allegedly used money misappropriated from one customer’s account to cover unauthorized transfers from another customer’s account.

The SEC is seeking injunctive and monetary relief against Oppenheim and his wife. Separately, the U.S. Attorney’s criminal complaint charged Oppenheim with wire fraud, embezzlement, securities fraud, and investment adviser fraud. According to the Justice Department, the maximum possible sentence for embezzlement charge alone is 30 years in prison. If convicted, Oppenheim may also face upwards of $5 million in fines on top of any civil penalties obtained by the SEC.

Protecting Yourself from Potential Embezzlers

As with any criminal defendant, Oppenheim is innocent until proven guilty in a court of law. But the charges here illustrate the importance of cooperation between investment banks and stock brokerage firms and regulators to uncover suspected wrongdoing. Rogue employees may abuse the trust of their customers (and their employers) in misappropriating funds. Firms like JP Morgan should have policies and procedures in place to uncover wrongs committed by their employees. Investors should always be especially wary when an advisor tells them to withdraw money from a brokerage account and re-invest it with the advisor personally.

If you have withdrawn money out of your brokerage account and given that money to your broker to invest personally, you may be the victim of an unscrupulous brokerage employee or other investment scam and should immediately seek the advice of an experienced Florida securities fraud attorney. Contact Gregory Tendrich, P.A., today.

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