Philly Woman Ran $100M Securities Fraud Scheme: Feds

PHILADELPHIA — A Philadelphia woman is accused of running a $100 million securities fraud scheme, according to federal authorities.

U.S. Attorney Craig Carpenito announced Brenda Smith, 59, of Philadelphia, has been charged by complaint with four counts of wire fraud and one count of securities fraud.

Smith was arrested in Philadelphia an appeared in federal court in Newark, New Jersey Tuesday.

Smith is accused orchestrating a scheme using her investment fund, Broad Reach Capital, in which she lied to investors about the assets and performance of the fund and falsely stated that she would invest their funds in particular trading strategies from February 2016 to August 2019, according to authorities.

Smith collected more than $100 million in investments. Instead of investing the money as she promised, she diverted millions of dollars of investor funds out of Broad Reach Capital for other purposes, including paying other investors, authorities said.

When confronted with redemption requests by several large investors in Broad Reach Capital, Smith failed to honor the redemption requests and lied about the status of their investment and the fund, according to federal authorities.

In one instance, Smith allegedly induced a victim to invest in Broad Reach Capital, telling the victim that it was a trade-focused investment fund that employed particular trading strategies, authorities said.

Smith provided a one-page summary "tear sheet" about Broad Reach Capital that contained purported historical performance information, including a claim that the fund had a 1.76 percent return in February 2018, according to authorities.

In reality, Broad Reach Capital’s brokerage accounts lost approximately 50 percent of their value in February 2018, authorities said.

Smith also told the victim that the assets of Broad Reach Capital were tens of millions of dollars higher than they actually were, according to authorities.

The victim invested millions of dollars and Smith did not invest the victim's money in the trading strategies as promised, but instead transferred the victim's money to non-Broad Reach Capital bank accounts that Smith controlled and paid other investors with the victim's money, according to authorities.

The victim eventually made a redemption request for more than $46 million, authorities said. Smith failed to pay any portion of the redemption request, providing a series of shifting false excuses and explanations for the lack of redemption, according to authorities.

The wire fraud counts are each punishable by a maximum of 20 years in prison and a fine of $250,000, or twice the gross amount of gain or loss from the offense, whichever is greater.

The securities fraud count is punishable by a maximum of 20 years in prison and a fine of $5 million.