Federal Court Orders Former FINRA-Registered Broker’s Assets Frozen, Places Emergency Injunction on Firm

By Nathaniel Griffin

On June 3, 2014, the Securities Exchange Commission (“SEC”) petitioned for an emergency injunction preventing Albany, NY-based Scott Valente and The ELIV Group, LLC. (“ELIV”) from engaging in fraudulent securities trading. In its complaint, the SEC alleges misappropriation of customer funds and misrepresentations of customer account performance, investment guarantees, account values under management, and broker and firm qualifications.

ELIV Group claims to be an accredited organization; however, the firm is not registered with The Financial Industry Regulatory Authority “FINRA,” nor is Valente. In 2009 Valente was barred from associating with any FINRA members. This ban came after more than twenty customer disputes and other regulatory investigations by FINRA.

ELIV solicited customers through internet advertisements and investment seminars, claiming gains of over 34% for its managed customer accounts. The SEC alleges in its complaint that the customer accounts of over 80 persons were commingled within one account totaling over $8.8 million in initial investments, and that these funds have not seen gains, but have instead suffered dramatic losses. Further, the SEC claims that Valente made monthly and annual reports falsely stating the values of customer accounts and misrepresenting significant gains to his customers.

ELIV allegedly made numerous unauthorized withdrawals from customer funds for his personal use. In the customer agreements, Valente was entitled to 1% of the assets under management as his management fee. However, the total of the allegedly unauthorized withdrawals far exceeded that amount.

The sales tactics used by Valente are not at all uncommon, including in South Florida. According to the Financial Industry Regulatory Authority, approximately half of all investment seminars examined offered literature with exaggerated, misleading, or otherwise unwarranted information and 12% of seminars appeared to involve fraud.

For more information on advertising awareness, see FINRA’s Investor Alert: “Free Lunch” Investment Seminars—Avoiding the Heartburn of a Hard Sell.