A financial advisor who was barred from the industry over allegations he misappropriated clients’ money is accused of defrauding investors again in a different scheme 30 years later.
Despite the SEC banning David W. Schamens in 1992 from association with any broker, dealer, municipal securities dealer, RIA or investment company, he was holding seminars through a business called “TradeStream University” and pitching a product he called the “TradeStream Algo Fund” to retail investors in 2019,
Schamens, a 64-year-old resident of Greensboro, North Carolina, now faces criminal charges of wire fraud, securities fraud and money laundering and a civil rap of fraud and other violations. The case offers the latest example of the problem of
“Unfortunately, financial services fraud recidivism is far too common and often with tragic results. Very often the targets are vulnerable adults with limited assets and diminished physical capacity,” Louis Straney, a fraud expert who has a company called Arbitration Insight, said in an email. “A suspension or permanent regulatory bar only closes one channel for fraudulent activities. There are others, and the bad actors are well aware of that.”
It’s not possible to “prevent liars from lying,” Straney added, but greater awareness and prevention programs, tougher fines and sentences, and a realization among regulators that many investors aren’t proficient with computers could reduce their harmful impacts.
“This is not the first time that David Schamens has been charged by the SEC for misconduct and serves as a good reminder for investors to research potential advisers,” SEC New York Regional Director Richard Best said in a
What the regulator’s press release trumpeting the case failed to mention, though, is that the
Representatives for the SEC didn’t respond to inquiries about the alleged repeat misconduct and the shortcomings of the available information.
In the 30-year-old case, Schamens didn’t admit or deny the SEC’s allegations while settling. An attorney for Schamens didn’t respond to requests for comment on the latest cases against him in the federal court of Newark, New Jersey, where the Secaucus-based Algo Fund and another entity “used by Schamens in the fraud” were located, according to the SEC.
The SEC case involves the Algo Fund and Schamens’ conduct between February 2019 and this month, while the criminal case spans a period beginning five years earlier. Schamens steered the investors’ money toward vacations, a luxury car and a million-dollar home, as well as payments to previous victims and other uses that had nothing to do with the clients’ investments, according to federal prosecutors.
Investigators believe he sold the investors on two different funds during the scheme. In the Algo Fund, Schamens told them he would “pursue an algorithm-driven stock trading strategy with the potential for high returns,” according to the SEC. With other entities he called “TD Trading LLC” and “TFG Trading LLC,” he convinced them to invest in short-term loans to day traders using the TradeStream platform that would pay fees ensuring profits independent of their trades, according to the feds.
Investors in the latter vehicles lost about $3.35 million, while those purchasing the limited partnerships offered by the Algo Fund lost about $3.45 million, federal investigators say. Schamens had promised them annual returns of 12% to 30%, the criminal complaint shows.
“Schamens concealed the fraudulent nature of the Algo Fund by providing investors with fake account statements that showed large profits and by providing them with a fake letter from an auditing firm vouching for the bona fides of the Algo Fund,” according to the SEC complaint.
A federal judge released Schamens on $500,000 bail on March 8 prior to his trial to face the charges, court records show. Under the terms of his release, he’s not allowed to promote or solicit others on “any investment vehicle or business venture,” open any new bank accounts or cause any third parties to create new businesses, the bail document states.
