The U.S. Securities and Exchange Commission (SEC) has charged the owner of independent broker-dealer John Thomas Financial, and a Houston-based hedge fund manager with working together to defraud investors.
According to the securities regulator, Anastasios “Tommy” Belesis” and George R. Jarkesy Jr. worked closely together to launch two hedge funds that raised $30 million from investors.
Jarkesy, as a part of the scheme, supposedly led investors to believe that he was making all the investment decisions. In reality, Belesis was in charge of directing some investments from the hedge funds into a company in which his firm was invested, according to the SEC. In addition, Belesis “also bullied Jarkesy into showering excessive fees on John Thomas Financial, even in instances where the firm had done virtually nothing to earn them,” the SEC said.
Jarkesy was charged by the SEC with violating his firm’s fiduciary duty to its investors by catering to Belesis. The regulator charged that he inflated the valuation of the funds, which increased the fees he collected. He then diverted the money to John Thomas Financial.