SEC Pursues Two Former Advisers Tied to Nikolai Battoo & PIWM
Last week the Securities and Exchange Commission announced that it was pursuing charges against two Florida men, Gregory Adams and Larry Grossman. Both men were involved in a company called Sovereign International Asset Management. The SEC accuses both men of committing fraud by failing to truthfully inform clients about compensation received from offshore funds. Prosecutors say the men recommended the investments as safe even though they knew the investments carried substantial risks and “red flags”. A copy of the preliminary SEC order can be accessed here.
Grossman and Adams also are charged with contributing to violations of the “custody rule” that requires investment advisory firms to establish specific procedures to safeguard and account for client assets.
The SEC claims that Adams and Grossman solicited their clients to invest “almost exclusively” in funds controlled by an asset manager named Nikolai Battoo. Battoo and his marketing ally Tracy Sunderlage are the subject of another SEC action. Those two men may have caused investors to lose over a billion dollars.
“Investment advisers have a fiduciary duty to act in utmost good faith when recommending investments, and they must fully disclose all of the relevant facts to their clients,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “Adams and Grossman breached this duty when they misstated their compensation and failed to disclose serious conflicts of interest.”
We agree with Bustillo’s comments. [In the interest of full disclosure, our firm previously sued Adams, Grossman and Sovereign. Unfortunately, the company is now out of business making future collectibility against the men doubtful.]
The SEC says that at its peak, Sovereign had $85 million of assets under management. The firm targeted retirees with self-directed IRAs. No matter what the client’s investment objectives or financial situation, their clients money ultimately was funneled to Battoo.
The money was invested through several vehicles; Anchor Hedge Funds (a company controlled by Grossman and Battoo), FuturesOne Diversified Fund (the SEC says that company was controlled by Nikolai Battoo) and PIWM. All of those entities are now insolvent.
According to the SEC’s complaint, Grossman told investors that their monies would be invested in a diversified “fund of funds.” He described his Anchor fund as “safe.” All of those representations proved to be untrue.
In addition to charging fees to clients, the SEC says Grossman was paid approximately $3.3 million and Adams received $1 million in the undisclosed compensation arrangements.
Collecting any money from either men may prove to be difficult. As noted above, Sovereign International Asset Management, PIWM, Anchor Hedge Funds and FuturesOne are all out of business. The SEC last year started an action against Battoo and his marketing partner, Tracy Sunderlage. To date that action has not brought in much money.
According to the SEC, Adams is now the managing director of Weybridge Capital which manages the Sheffield family of funds (BVI). Grossman is now running a business called Sovereign International Pension Services.
Investors who lost money in PIWM, FuturesOne or the Anchor funds may still be able to get back their lost monies, however.
Many of these investments were sold by independent third parties such as insurance agents, stockbrokers and investment advisers. We currently have actions against Dennis Edmonds, Ellwood Jones, NFP Securities and J.P. Turner*. We have also pursued cases against insurance agents who also sold these investments.
For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731 (direct). All inquiries are kept confidential. Be sure to use our blog search tool to read over 20 articles o Battoo, Sunderlage and PIWM specific information.
Post by Brian Mahany, Esq.
*Many times, arbitration claims are filed against the broker’s present or former employer and not the individual. Until a regulatory body or court takes action, we don’t want to suggest that these individuals have broken any laws.