Final Judgment Entered Against Anthony B. Liddle for Defrauding Senior Investors

2024-05-05

On February 28, 2024, the U.S. District Court For the Western District Of Wisconsin entered a final judgment against Defendant Anthony B. Liddle (“Liddle”) for defrauding investors who were senior citizens. Liddle led Prosper Wealth Management (“PWM”), an investment adviser firm previously registered with Wisconsin. 

Facts Of The Case 

Liddle obtained his initial securities license in 2008. From 2011 to May 2022, he served as a registered and investment adviser representative with various SEC and state-registered broker-dealers and investment advisers, including PWM, offering guidance on securities investments to clients and potential clients. His compensation comprised commissions from product sales and advisory fees based on managed client assets.

Around December 2016, Liddle founded PWM in Rhinelander, Wisconsin, providing securities and advisory services through SEC-registered broker-dealers and as a State of Wisconsin-registered investment adviser. In this capacity, Liddle offered investment advice to over 150 advisory clients, with PWM receiving a portion of clients' commissions and advisory fees, from which Liddle drew compensation.

From June 2019 until May 2022, Liddle orchestrated a fraudulent scheme, victimizing at least 13 advisory clients, mostly senior citizens. In this scheme, he misled clients about the risk associated with GWG L Bonds and similar investments, falsely portraying them as lower-risk alternatives to their existing holdings. Clients were persuaded to sell their current investment and transfer the proceeds to PWM, ostensibly to purchase the new, supposedly safer securities. 

However, Liddle never made the promised investments, instead pocketed around $1.9 million of clients' funds. He also fabricated investment statements and "interest payments" using client money to sustain deception. 

LIDDLE'S DECEPTIVE PRACTICES REGARDING INVESTMENT RISKS FOR ADVISORY CLIENTS

From June 2019 until May 2022, Liddle advised certain advisory clients to liquidate their existing securities or other investments, employing various falsehoods to convince them he was pursuing safer investment avenues on their behalf.

For instance, around mid-2020, amid the COVID-19 pandemic's market turbulence, Liddle contacted clients, many of whom were elderly, advising them to divest from their holdings, ostensibly to transition into purportedly safer, lower-risk investments. However, his true intent was to acquire liquid assets as the initial step in his fraudulent scheme.

Starting in March 2020 at the latest, Liddle misled numerous advisory clients about the risks associated with GWG L Bonds. Despite being aware, or negligently unaware, that GWG had disclosed the high-risk nature of investing in L Bonds in their 2020 Prospectus, Liddle continued to assert to his clients that these investments were low-risk. He obtained materials concerning GWG L bonds’ high risk from SEC-registered broker-dealers he was affiliated with, and he was also aware of the suspensions affecting GWG in 2021 and 2022.

Despite knowing the risks associated with GWG L Bonds since at least the release of the March 30, 2020 Prospectus, Liddle consistently assured his clients orally, in writing, and through electronic communications that these bonds were low-risk investments. For example, in December 2021, he assured a client at a nursing home about the safety of L Bonds, even guaranteeing monthly interest payments accruing from the bonds, received $110,000 from the client yet never invested the client's $110,000.

During both the 2021 and 2022 suspensions of GWG L Bond sales, Liddle deceived certain clients about the availability of these bonds. In one instance, in May 2021, a month after the 2021 suspension commenced, despite knowing the bonds weren't available, Liddle persisted in recommending them to elderly clients, leading one of the senior investors to apply for the bonds despite their unavailability.

Throughout the scheme, Liddle falsely promised clients regular monthly interest payments from GWG L Bonds and other securities. For example, in approximately June 2021, he misled an 81-year-old client into believing her $40,000 had been invested in GWG L Bonds when he hadn't. Despite the absence of actual investments, Liddle continued to make purported monthly returns to maintain the illusion of investment activity. These deceitful practices inflicted substantial financial harm on his clients, undermining their trust and leading to significant losses.

LIDDLE'S MISREPRESENTATIONS REGARDING THE USE OF CLIENT FUNDS

Between June 2019 and May 2022, Liddle deceitfully informed his advisory clients that their funds were invested in securities products yielding regular returns, including GWG L Bonds. He instructed clients to send funds directly to PWM, promising to make the investments on their behalf. However, he was aware that PWM did not hold custody of client funds, and there was no legitimate reason for clients to send funds directly to PWM.

Several clients even indicated the specific security on the memo line of their checks, believing Liddle had purchased for them. Despite these assurances, Liddle never executed the recommended transactions and diverted client funds to a secret PWM account he opened in June 2019. He then used these funds to fabricate interest payments and support his fraudulent activities.

To sustain the illusion of legitimate investments and returns, Liddle provided forged PWM client statements to certain clients, falsely indicating their investments in GWG L Bonds or similar products. In one instance in January 2022, he assured a client via email that her GWG investment was secure and available for withdrawal, despite never actually purchasing the bonds. These deceptive practices enabled Liddle to conceal his fraudulent activities while exploiting his clients' trust and finances for personal gain.

Complaint Filed Against The Defendant 

Between June 2019 and May 2022, defendant Anthony B. Liddle orchestrated a fraudulent scheme, diverting approximately $1.9 million from clients of PWM, an investment adviser under Liddle's control and registered with the State of Wisconsin at the time. Liddle also deceived at least 13 advisory clients, many of whom were senior citizens, by providing false information about the utilization of client funds and the risk associated with their investments. These misrepresentations occurred through personal interactions, email correspondence, and telephone conversations.

Liddle falsely asserted that the securities held within clients' portfolios had become less secure, proposing alternative investments that he claimed were lower risk. Relying on Liddle's misleading representations, clients sold their securities holdings and transferred funds to PWM to follow Liddle's investment advice. Liddle subsequently confirmed the execution of these recommended investments, even providing written statements. However, in reality, Liddle never executed any of these transactions. Instead, he misused clients' funds and sustained the deception by providing fictitious "interest returns" on their investments, sourced from pooled victim funds.

The SEC initiates this civil enforcement action to safeguard investors against future harm and to hold Liddle accountable for his fraudulent actions.

Background Of The Defendant 

Anthony B. Liddle, aged 40, resides in Wausau, Wisconsin. Liddle has been active in the securities industry since 2008 and has served as an investment adviser since at least 2011, holding various licenses granted by the Financial Industry Regulatory Authority (“FINRA”). Between June 2019 and May 2022, Liddle held roles as an investment adviser representative, broker representative, and registered representative affiliated with two SEC-registered firms, each dually registered as a broker-dealer and investment adviser. 

On June 14, 2022, FINRA imposed a ban on Liddle, prohibiting his association with any FINRA member. Subsequently, on August 4, 2022, the Wisconsin Department of Financial Institutions, Division of Securities (“WI DFI”) issued a summary order permanently prohibiting Liddle from registering with the WI DFI in any capacity. Liddle initiated a voluntary Chapter 7 bankruptcy filing in the Western District of Wisconsin.

Background Of The Related Entity

Prosper Wealth Management, LLC, a now-defunct Wisconsin limited liability company, operated primarily from Wausau, Wisconsin. From June 2019 to May 2022, PWM provided financial advisory services and was registered as an investment adviser with the State of Wisconsin. Employing approximately three individuals, Liddle served as the owner, managing member, and overseer of the firm's operations, including control over its bank accounts.

GWG Holdings, Inc. is a publicly-traded company headquartered in Dallas, Texas. GWG’s common stock was delisted from the Nasdaq Stock Market on May 17, 2022. Before 2018, GWG, through its various subsidiaries, specialized in acquiring life insurance policies on the secondary market. 

However, in 2018 and 2019, GWG shifted its focus to providing liquidity and other services to investors holding illiquid alternative assets. GWG marketed L Bonds, which were unrated, illiquid, high-risk, and potentially speculative securities. GWG temporarily halted the sale of L Bonds from April 2021 until November 5, 2021 (“the GWG 2021 Suspension”) due to its inability to file its 2020 Form 10-K. 

On November 5, 2021, in its annual Form 10-K filing, GWG publicly disclosed its auditor's going concern qualification for its 2020 financial statements, indicating serious concerns about the company's viability. 

Subsequently, on January 10, 2022, GWG suspended further sales of L Bonds due to its inability to meet interest payments on the L Bonds (“the GWG 2022 Suspension”). On April 20, 2022, GWG filed for Chapter 11 bankruptcy.

Court Gives Final Judgment Against The Defendant 

Liddle is permanently restrained and enjoined from violating Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder. He used means in connection with the purchase or sale of any security: 

  1. to employ any device, scheme, or artifice to defraud or 
  2. to make any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in the light of the circumstances under which they were made, not misleading or 
  3. to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

Liddle is permanently restrained and enjoined from violating Section 17(a) of the Securities Act of 1933 (the “Securities Act”) in the offer or sale of any security by the use of any means 

  1. to employ any device, scheme, or artifice to defraud
  2. to obtain money or property using any untrue statement of a material fact or any omission of a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading; or 
  3. to engage in any transaction, practice, or course of business that operates or would operate as a fraud or deceit upon the purchaser.

Additionally, Liddle is permanently restrained and enjoined from violating Sections 206(1) and (2) of the Investment Advisers Act of 1940 (“Advisers Act”) by the use of means - 

  1. employing any device, scheme, or artifice to defraud any client or prospective client 
  2. engaging in any transaction, practice, or course of business deemed as fraud or deceit upon any client or prospective client.
  3. Liddle is also liable for disgorgement of $1,662,041.80, representing net profits gained from the conduct alleged in the Complaint
  4. Further, Liddle is barred from serving as an officer or director of a publicly-held corporation under Section 21(d)(2) of the Exchange Act. 

Key Takeaways For The Investors 

The key takeaways for investors from this case are:

DUE DILIGENCE

Investors should conduct thorough due diligence before entrusting their funds to any financial adviser or investment firm. This includes researching the background, qualifications, and adviser’s track record, and verifying their registration status with relevant regulatory authorities.

RED FLAGS

They should be vigilant for red flags such as promises of high returns with low risk, unsolicited investment advice, or pressure to make quick investment decisions. These can be indicators of potential fraudulent activity.

REGULATORY COMPLIANCE

Investors should ensure that the financial adviser or investment firm they are considering is registered with the appropriate regulatory authorities and complies with all relevant laws and regulations. This can provide investors with additional protections and avenues for recourse in case of misconduct.

DOCUMENTATION AND COMMUNICATION

Investors should maintain all investment  documents and related communications they have with their financial adviser. This can help investors track their investments, identify discrepancie,  and provide evidence in case of disputes.