Advisor’s Fraud Leads to Prison Sentence
A 63-year-old former financial advisor was sentenced to 32 months in federal prison for wire fraud after defrauding a client of $531,411.00 over approximately six years. The sentencing, announced on September 30, 2025, by the U.S. Attorney’s Office, followed the advisor’s guilty plea in June 2025. The fraud targeted a client who inherited $2 million in a revocable trust in 2013, with explicit instructions to manage the funds conservatively for retirement.
The advisor, who began his securities career in 2006, was affiliated with multiple broker-dealers in Seattle from 2012 to 2023, including a firm later absorbed into a larger broker-dealer network. His industry record indicates he was terminated in 2023 for violating firm policies, such as acting as power of attorney for client accounts and engaging in unapproved financial transactions for third-party services.
Over a decade, the advisor built trust with the client, even as he switched firms, and manipulated them into providing blank checks, granting power of attorney, and giving access to their apartment. Between 2016 and 2020, he used 12 blank checks to siphon $397,000.00, funneling the funds through another client’s account before depositing them into his own. He also transferred $115,226.00 directly to his personal account and used the victim’s funds to cover his luxury car lease payments. The fraud came to light in 2022 when the client, concerned about diminishing account balances, prompted an audit that revealed the theft.
Robo-Advisor Faces Hefty Regulatory Fine for Recordkeeping Failures
A Charlotte, North Carolina-based robo-advisor and online brokerage agreed to pay an $850,000.00 fine and accept a censure from the Financial Industry Regulatory Authority (FINRA) on October 9, 2025, for failing to preserve over 22.6 million business-related electronic communications. The violations, spanning September 2016 to November 2022, represent one of the largest penalties levied against a robo-advisor for recordkeeping and supervisory lapses, aligning it with other high-profile cases in the digital advisory space.
According to the settlement agreement, the firm’s failures resulted from technical errors across three systems, including a coding issue during a transition to a new records-retention system. This caused the loss of critical customer communications related to trade executions, fund transfers, and account activities, as well as internal and external messages from approximately 90 group mailboxes. These lapses prevented the firm from fully responding to 39 regulatory inquiries from FINRA and the Securities and Exchange Commission (SEC) during the period.
FINRA also found the firm’s supervisory procedures inadequate. Responsible for reviewing communications across 120 group mailboxes and a customer-service software platform, the firm failed to ensure these were properly connected to its review system, resulting in at least 521,000 unreviewed communications. This violated FINRA’s requirements for timely oversight of business-related correspondence.
The firm’s proactive response helped mitigate harsher consequences. It identified and self-reported the issues before regulatory detection, swiftly corrected the system failures, and conducted a thorough review of its recordkeeping processes. FINRA acknowledged the firm’s “extraordinary cooperation,” including providing detailed summaries that aided the investigation. The $850,000.00 fine places the firm among other robo-advisors penalized for similar issues, such as a $70 million fine in 2021 for customer harm and a $26 million penalty in 2025 for various compliance failures in other cases.
These cases emphasize the increasing regulatory scrutiny on digital financial platforms and the critical importance of maintaining robust technological systems to meet recordkeeping obligations in today’s digital-first financial environment. It serves as a reminder for firms to prioritize compliance infrastructure to avoid significant penalties and reputational damage.