The founder of a New York investment advisory firm is facing up to two decades in federal prison on allegations that he misappropriated more than $1 million from a married couple in California.
Jeffrey Slothower, a former registered investment advisor and
Breon Peace, U.S. Attorney for the Eastern District of New York, said the 43-year-old Southampton man carried out a calculated scheme that saw him repeatedly lie to his longtime clients about putting their money into legitimate investments.
“In reality he stole their money to fund his lavish lifestyle,” Peace said in a statement. “This office will vigorously investigate and prosecute corrupt financial advisors like the defendant who abuse their clients’ trust and violate the law to enrich themselves.”
According to court documents, Slothower founded Battery Private in 2016 after leaving Merrill Lynch earlier that year. BrokerCheck shows Slothower was affiliated with Merrill Lynch from 2010 to 2016.
After launching his new company, Slothower solicited business from a couple from California with whom he worked at his previous firm. Slothower made promises to his prospective clients to beat any rate of return they were receiving without market risk.
The husband declined, according to court documents, but the wife signed an investment advisory contract with Battery Private. Slothower continued working to earn the husband’s business as well, and in 2017, he offered to invest the husband’s money into what Slothower described as bonds backed by homeowner’s association fees.
Slothower claimed these HOA bonds would pay an 8% return, so the husband agreed to invest with Slothower through Battery Private, court documents said.
In January 2017, the husband sent three wire transfers totaling $546,727 to Slothower at Battery Private to be invested in the purported HOA Bonds. Court documents said Slothower then used that cash to purchase a $125,000 luxury car, pay fees for a private golf club on Long Island and more.
To keep the deception alive, Slothower made payments to the husband, claiming the payments represented quarterly distributions from the investment.
Court documents said that as Slothower sought additional funds, he asked the husband to find more money to invest, including money from his wife who was already a Battery Private client. The wife was told about the HOA bonds, as well as the return they provided, and agreed to invest as well.
In December 2017, the wife sent $540,208 to Slothower’s company from her personal account under the direction of her advisor, court documents said. That money was used to address Slothower’s credit card bills and other personal expenses.
Court documents said the husband made an additional investment of approximately $84,000 in June 2018. But the plot began to fall apart in November 2018 when Slothower stopped sending his clients their quarterly payments.
In a December 2018 email to Slothower, the husband demanded that the advisor return their investments and any associated earnings. Court documents said Slothower declined, and instead offered them an alternative asset to invest in.
When the couple made it clear they weren’t interested in Slothower’s counter, Slothower then told them via email that “the liquidated wire would be very tough in the short time period” and that they would get their money after the end of the fourth quarter, according to court documents.
The husband continued to push for answers throughout early 2019, but Slothower maintained that their funds were tied up by the liquidation process and would be available shortly. The victims have yet to receive additional payments from Slothower or Battery Private.
Louis Straney, a former regulator and securities litigation consultant who often serves as an expert witness, said it is critical for investors to take advantage of free public resources such as state securities commissioners’ offices and FINRA BrokerCheck to keep tabs on advisors.
He added that the advice stands even when working with the same advisor for multiple years, and is of great importance to senior investors who aren’t in a position to recover lost funds.
The reason, Straney said, is that bad actors are not the norm within the industry. Straney said most FINRA associated advisors have a clean record. So if there is a long list of disclosures under a broker’s name, the investor should consider them red flags.
These cases also have the ability to chip away at the trust generated by advisors who serve their clients admirably. But Straney believes the good done by trustworthy advisors is enough to keep negativity about the profession at bay.
“I think it's a challenge that advisors face because it’s the bad apple issue,” Straney said. “There's 600,000 brokers out there who do a great job for their clients. But a few come along like this, and they have to deal with it.
“But If you look at Bernie Madoff and some other fraudsters, that didn't ruin the investment platforms. It just hopefully made people more cautious.”
Attempts to reach Slothower and Battery Private representatives for comment were unsuccessful.
According to the Department of Justice, Slothower faces up to 20 years in prison if convicted.
