By Qudsia Shafiq, Fall 2017 IAC Student Intern
What can happen when a financial adviser meets deep-pocketed athletes who refuse to invest in his movie venture proposals? For one financial adviser, this meant ignoring the pros that told him no.
On May 6, 2016, the U.S. Securities and Exchange Commission (SEC) filed a complaint against Louis Martin Blazer III for allegedly repeatedly taking money from his clients under the guise of raising money for two film projects: “Mafia the Movie” and “Sibling.” The SEC charged Blazer, a Pennsylvania-based financial adviser with defrauding pro athletes and lying to SEC Examiners. The high-end, concierge firm allegedly took nearly $2.35 million from five different clients without their consent, all to invest in the two movie projects.
How did it happen? Blazer created a registered investment advisory firm (“Blazer Capital”) and a limited liability company for each movie. Blazer allegedly planned to sell the LLC interests to his clients to raise at least $1 million for the movie ventures.
When he was unable to meet his goal, the SEC alleges that Blazer turned to his clients. One Client, a professional athlete, refused to make the investment, but Blazer allegedly forged documents to give the illusion that the Client authorized the $550,00.00 transaction to purchase LLC interests in both movies. When the first Client realized what had happened and threatened to take legal action against Blazer, Blazer then allegedly repeated the same mistake and made unauthorized transfers from another Client’s account, who also happened to be a professional athlete, to repay the first Client. To make matters worse, the following year in 2013, Blazer then allegedly made false statements and produced falsified documents to SEC’s examination staff about the suspicious transactions. Once uncovered, the SEC announced their fraud charges against Blazer.
Within two weeks of filing the complaint against Louis Martin Blazer III, on May 18, the court entered a partial judgment and Blazer agreed to an SEC order, which permanently barred Blazer from practicing in the financial industry.
Fast forward to August 4, 2017, and the case finally ended when the U.S. District Court for the Southern District of New York entered a final judgement ordering Blazer to pay nearly $2 million in for defrauding pro athletes.
What’s the lesson to learn? When an investor says no, the investment adviser needs to listen. Because in the end, movies might be a big hit in theaters but maybe not for your bank account.