Southampton Investment Advisor Sentenced After Fraud Scheme To Misappropriate $1M+ From Clients: Feds

SOUTHAMPTON, NY — A Southampton investment advisor was sentenced to 72 months behind bars after a fraud scheme during which he stole more than $1 million from clients, Joseph Nocella, Jr., United States Attorney, Eastern District of New York, said Thursday.

At an appearance in federal court in Central Islip, Jeffrey Slothower, 47, was sentenced by United States District Judge Gary R. Brown to 72 months in prison after committing wire fraud, investment adviser fraud and money laundering in connection with a scheme to misappropriate more than $1 million from clients, the Department of U.S. Department of Justice said.

In addition to the terms of imprisonment, Judge Brown ordered Slothower to pay $1,160,936 in restitution and in forfeiture, the DOJ said.

Nocella and James C. Barnacle, Jr., Assistant Director in Charge, Federal Bureau of Investigation, New York field office, announced the sentence.

"Jeffrey Slothower used his position as an investment advisor to steal over a million dollars from an unsuspecting couple," Nocella said. "Today’s sentence sends a message to all those that would use their positions as financial professionals to line their own pockets – our office will prosecute you to the full extent of the law."

"Jeffrey Slothower crafted fabrications of profitable returns to conceal his true intention of reaching into his clients’ wallets and personally pocketing their investments," Barnacle said. "Slothower stole more than $1 million from his investors to fund extravagant purchases and repay his own credit card bills. The FBI will continue to unravel any web of lies used to unlawfully solicit investments at the cost of trusting clients."

As proven at trial, Slothower orchestrated a scheme to misappropriate more than $1 million from current and prospective clients, the DOJ said.

Specifically, while operating Battery Private, a New York investment advisory firm, Slothower solicited business from Victim-1 and Victim-2, a couple from California whose money Slothower had managed at another financial services firm, where he was previously employed, the DOJ said. Slothower promised the couple that he could beat any rate of return they were receiving and do so without market risk, the DOJ said.

In 2017, he offered to invest Victim 1’s money into what Slothower described as bonds backed by homeowner’s association fees — the "HOA bonds" — which would pay an 8 percent return, the DOJ said.

Based on Slothower’s representations, in January 2017, Victim-1 sent more than $500,000 to Slothower at Battery Private to be invested in the purported HOA bonds, the DOJ said. Instead of investing in HOA bonds or holding the funds as promised, however, Slothower funneled the money into his personal bank accounts, and then used those funds to purchase a $125,000 Mercedes Benz SUV, and membership dues at Long Island National Golf Club, a private East End country club, the DOJ said. To further the fraudulent scheme, Slothower made payments to Victim-1 that were falsely represented as quarterly distributions from Victim-1’s "investment."

Later, Slothower solicited Victim-1 to invest additional money, including funds controlled by Victim 2, who was then a Battery Private client, the DOJ said. Enticed by the supposedly steady rate of return, Victim-2 agreed to invest in the same purported HOA bonds, and in December 2017, Victim-2 sent more than $500,000 to Slothower at Battery Private, the DOJ said.

However, like Victim 1, Victim-2’s money was not invested in HOA bonds, the DOJ said. Instead, Slothower used that money to pay tens of thousands of dollars in personal credit card debt traced to an approximately $6,500 Chanel purse, an approximately $13,000 Rolex watch, and more than $11,000 in Ralph Lauren clothing, among other things, the DOJ said.

To further the fraudulent scheme, Slothower made payments to Victim-2 that were falsely represented as quarterly distributions from Victim-2’s investment, the DOJ said. Slothower’s scheme continued through June 2018, when he defrauded Victim-1 out of about $84,000, the DOJ said.

Slothower used Victim-1’s money to make purported quarterly payments to Victim-1 and Victim-2 that were falsely represented as their investment returns and to pay membership dues at the private golf club, the DOJ said.

During the same period that Slothower defrauded Victim-1 and Victim-2, he also engaged in mortgage fraud, the DOJ said. While attempting to refinance a mortgage on a residence he owned, Slothower misrepresented to the mortgage lender, both orally and through the submission of false invoices, that the victims’ funds had come from Slothower’s sale of a wine collection, a stamp collection, and a fine art collection, the DOJ said.

At his trial, Slothower lied under oath when he denied classifying the victims’ funds as the proceeds of an asset sale., the DOJ said.

Slothower's attorney Evan Sugar could not immediately be reached for comment.