The Securities and Exchange Commission has alleged that Connecticut resident David S. Haddad and two of his companies engaged in a fraudulent scheme to raise funds from retail investors.
The SEC said that Mr. Haddad and the two companies offered to settle the case by, among other things, agreeing to pay a total of over $1 million, which included disgorgement of money the SEC said that Mr. Haddad took in from investors and used for his own personal purposes.
The SEC alleged that Mr. Haddad operated two companies in the reinsurance industry, Trafalgar Square Risk Management, LLC, and New England RE, LLC. Mr. Haddad allegedly began raising money from investors through the offer and sale of unregistered securities in Trafalgar in or before 2012. He began offering unregistered New England RE securities to investors in late 2014 and, through the Trafalgar and New England RE offerings, raised at least $2.5 million from at least 29 separate investors, according to the SEC.
The SEC alleged that, while making these offers and sales, Mr. Haddad, individually and on behalf of Trafalgar and New England RE, made various misleading claims to investors about the use of their funds. According to the SEC, Mr. Haddad led investors to believe that their funds would be used to build and grow Trafalgar and New England RE when, in fact, Mr. Haddad diverted a significant portion of the investors' money for his own purposes, including the purchase of multiple homes, art and antiques, entertainment, and expenses of a dog rescue charity founded by Mr. Haddad. The SEC asserted that Mr. Haddad also used some investors' money to make Ponzi-like payments to other investors. According to the SEC, the money Mr. Haddad used to support his lifestyle far exceeded Trafalgar's revenues.
The SEC's complaint, filed in federal court in Connecticut, charged Mr. Haddad, Trafalgar, and New England RE with violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.
Without admitting or denying the allegations of the complaint, Mr. Haddad, Trafalgar, and New England RE consented to the entry of final judgments permanently enjoining them from violations of these laws.
Mr. Haddad and Trafalgar also agreed to pay, jointly and severally, a total of $619,382.43 in disgorgement plus prejudgment interest of $25,131.83.
Mr. Haddad and New England Re agreed to pay, jointly and severally, a total of $269,080 in disgorgement, plus prejudgment interest $2,592.66.
In addition, Mr. Haddad agreed to pay a civil monetary penalty of $181,071 and consented to the imposition of a permanent bar prohibiting him from acting as an officer or director of a publicly-traded company. Mr. Haddad further consented to a permanent injunction prohibiting him from providing information to, soliciting, or accepting investments or funds from any investor or potential investors regarding the offer or sale of any securities issued by any entity that he directly or indirectly owns, controls, consults for, or is employed by, unless he first provided such person with a written disclosure regarding his prior regulatory history and maintained written records of such disclosures.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].