SEC Charges Advisory Firm and Executives with Devising an Elaborate Scheme to Defraud Clients out of More Than $75 Million

According to the SEC’s complaint, from July 2017 through 2018, Lindberg and Herwig, through Standard Advisory, breached their fiduciary duties to their advisory clients by fraudulently causing them to engage in undisclosed related-party transactions that were not in the best interest of their clients. The SEC’s complaint further alleges that the defendants misappropriated more than $57 million in client funds and that Standard Advisory collected more than $21.4 million in advisory fees generated in connection with these schemes. In an attempt to conceal the fraud, Lindberg allegedly orchestrated the schemes through complex investment structures and a web of affiliate companies and allegedly used the proceeds to pay themselves or to divert the funds to Lindberg’s other businesses.

“We allege a massive fraudulent scheme, involving unique financial structures and various complex investments, orchestrated by the defendants for their own benefit over their advisory clients’ benefit,” said Osman Nawaz, Chief of the Division of Enforcement’s Complex Financial Instruments Unit. “Today’s filing demonstrates that the SEC will take action to protect investors from investment advisers who attempt to evade fundamental fiduciary responsibilities.”

The SEC’s complaint, which was filed in the U.S. District Court for the Middle District of North Carolina, charges Lindberg, Herwig, and Standard Advisory with violating the antifraud provisions of the Investment Advisers Act of 1940, and seeks disgorgement plus prejudgment interest, penalties, and permanent injunctions.

The SEC’s investigation was conducted by Kevin Wisniewski, Craig McShane, and Kristine Rodriguez and supervised by Ana D. Petrovic, of the Complex Financial Instruments Unit and the Chicago Regional Office. The litigation will be led by Alyssa Qualls and Kevin Wisniewski of the Trial Unit.