12.10.09

Investools settles suit by SEC, to pay $3 million

Posted in All Categories, Fraud, Stocks at 11:27 am by Michael Goode

The SEC just published a litigation release today, announcing a large settlement with Investools, a company that runs investment workshops. The release makes for some juicy reading. The SEC’s complaint is available online.

Investools agreed to a civil injunction and to pay a $3 million civil penalty. Drew and Miller agreed, respectively, to pay civil penalties of $380,000 and $130,000, and to be enjoined from violating the antifraud provisions of the federal securities laws. Drew and Miller additionally agreed to be enjoined, for five years, from receiving compensation for their participation in, among other related activities, the sale of classes, workshops, or seminars given to actual or prospective securities investors concerning securities trading. In settling the matter, Investools, Drew and Miller neither admitted nor denied the allegations in the Commission’s complaint.

Perhaps the funniest part is that while the Investools salesmen claimed they were great traders, they were allegedly poor traders who lost money.

The Commission’s complaint alleges that from 2004 to approximately June 2007 at Investools how-to-trade-securities workshops former Investools employees Drew and Miller misleadingly portrayed themselves as expert investors who made their living trading securities. They did so to mislead investors into believing that they too would make extraordinary profits trading securities if they purchased expensive Investools instructional courses and other products and followed Investools’ securities trading strategies. The complaint further alleges that in reality, neither Drew nor Miller made the trading profits they claimed. For example, in 2005 and 2006, while Drew was portraying himself as a successful investor, he had hundreds of thousands of dollars in net trading losses. In 2006 and 2007, while Miller was portraying himself as a successful investor, he had tens of thousands of dollars in net trading losses.

The SEC also states in the release that the investigation of Investools is ongoing.

Investools Ad

What is the moral of the story? Don’t trust anyone. If someone says they are a good trader and have a good trading system, ask for verification. If their results are audited, check out the auditor.

Disclosure: I have no positions and I have no connection to anyone involved. I have a disclosure policy.

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