On December 20, 2017, the Securities and Exchange Commission announced that it had charged a Washington-based investment adviser with fraud. The Snohomish, Washington investment adviser is accused of misappropriation of fund assets and making misrepresentations to retail investors. A Morgan, Utah-based adviser has also been charged with fraud associated with his concealment of additional compensation received in connection with sales of interest in one of the funds.
The SEC’s complaint accuses Ronald A. Fossum Jr. of raising more than $20 million from over one hundred investors through unregistered securities offerings from March 2011 to June 2016. The offerings were for investment funds owned and controlled by Fossum. They include Turnkey Investment Fund, Accelerated Asset Group, and Smart Money Secured Income Fund.
The SEC suggests that the defendant misappropriated hundreds of thousands of dollars in funds by living rent free and using the money to pay other personal expenses. The SEC complaint alleges that Fossum also induced new investments in the Smart Money Secured Income Fund without making its poor financial condition known. The defendant is also accused of breaching his fiduciary duties by indiscriminately commingling fund assets to satisfy the funds’ liquidity needs.
Fossum and a partner, Alonzo R. Cahoon, are accused of breaching their fiduciary duties to the fund and misleading investors by claiming they would only receive a one-time management fee of $2,990 per investment unit sold as compensation. In reality, the SEC alleges that the defendant secretly pocketed $20,000 or more in compensation from each investment.
Additional details can be found here.