SEC Charges Texas Army Veteran With Defrauding Fellow Servicemen

On April 13, the U.S. Securities and Exchange Commission charged Leroy Brown, Jr., of Killeen, Texas, with securities fraud. The SEC said Brown, a 12-year veteran of the U.S. Army, conducted a “fraudulent scheme to lure current and former U.S. military personnel and others to invest with him and his firm.” A federal judge has already frozen the assets of Brown and his company, LB Stocks and Trades Advice LLC, pending resolution of the SEC’s complaint.

SEC v. Brown

According to the SEC, Brown left the Army in July 2013, and within a few months began soliciting other military members to invest with LB Stocks. Although the SEC said Brown had no “educational or work experience in the financial services industry,” he nonetheless marketed his ability to “double or triple” investors’ money with little risk. Specifically, Brown sold $1,000 “membership certificates” in LB Stocks, which were supposedly used to purchase and develop land.

The SEC said Brown’s entire operation was a facade. He claimed to be a licensed and registered securities dealer. He was not. The SEC said Brown never registered as a broker-dealer with the SEC or registered “in any capacity” with the Financial Industry Regulatory Authority (FINRA). And while Brown said LB Stocks operated a number of affiliated companies dedicated to providing “investment recommendations,” none of these affiliates actually existed. Indeed, the SEC said Brown’s websites largely consisted of copy lifted from the websites of established brokerages like E*TRADE.

Despite lacking any real credentials, experience or organization, the SEC said Brown managed to use his Army experience to lure fellow servicemen into investing with LB Stocks. Since 2014, the SEC said Brown has received an unspecified number of deposits into his “personal brokerage account,” which he then transferred to his personal bank accounts.

The SEC has charged Brown with violating anti-fraud provisions of both the Securities Act and the Exchange Act, as well as failing to register as a broker with the Commission. The SEC is seeking a permanent injunction against Brown and LB Stocks, as well as disgorgement of all funds “obtained illegally.” The case remains pending before a federal court in Waco, Texas.

Servicemen Beware

The SEC noted Brown used testimonials from active and retired U.S. servicemen to lure other members of the armed forces into investing with him. Securities fraud often relies on people exploiting their connection to a particular group. So-called “affinity fraud” depends on such personal relationships.

Even if you know the person soliciting you an investment product, you should always do your due diligence. Do not invest just because you think the person is trustworthy. If someone claims to be registered with the SEC or FINRA, check with those agencies to make sure.

And always be skeptical of individuals promising “double” or “triple” returns with little or no risk. Good investing is built on savings and long-term strategy tailored to your investment objectives and risk tolerance. As a rule of thumb, if someone is making you an offer that sounds too good to be true, it almost certainly is.

If you have been a victim of an investment scam and need legal advice on how to proceed, contact Boca Raton securities and stockbroker fraud attorney Gregory Tendrich, P.A., today.