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Asset Management Firm CEO Charged With $16M Fraud

Asset Management Firm CEO Charged With $16M Fraud

Attached below is a copy of an article recently reported by Rachel Graf and Law360 entitled “Asset Management Firm CEO Charged With $16M Fraud”. This article defines a pattern of conduct that is occurring everywhere. Scott Starr of Starr Austen & Miller within the last five years has represented over 100 victims of similar schemes, wherein a life insurance salesman, a stockbroker, or an investment advisor convinces his clients to purchase promissory notes, LLC membership interests, stocks, or such similar investments for the purported purpose of “investing in real estate” promising high returns, typically in the 10% range. In reality, the fraudster will then use all or a large part of his client’s investments to either support his own business or a lavish lifestyle. If and when a client wants out and needs his money, for a while the fraudster will return the client’s funds (typically with a nice return on the investment), or will sell more investments to use those proceeds to pay back earlier investors.

As described in the article below, these schemes never work out and eventually the investors are left holding the bag. If you or a loved one have invested in a similar real estate deal with an insurance salesman, broker or investment advisor, you may be a victim and not yet know it. Contact Starr Austen & Miller for a free no obligation consultation to learn the facts and your rights.

~ Written by Scott L. Starr

Asset Management Firm CEO Charged With $16M Fraud

By Rachel Graf of Law360.com

Virginia federal prosecutors have charged the CEO of a “self-described asset management firm” with swindling investors out of at least $16 million by misrepresenting that he would put the funds toward a real estate investment near the Silver Line of the Washington, D.C., Metro, the prosecutors said in a Friday statement.

Kiddar Capital LLC CEO Todd Elliott Hitt, who was arrested and charged with securities fraud, transferred portions of the money to his personal bank accounts or used it to pay his credit card bills and separate investors, prosecutors say. He could face up to 20 years in prison.

The U.S. Securities and Exchange Commission filed a parallel civil suit Friday, which Hitt decided to settle. As part of the deal, Hitt agreed to freeze his assets and not participate in real estate transactions. He also agreed to the appointment of a receiver who will “protect investors, prevent asset dissipation and loss and attend to the businesses,” the SEC said in a statement.

“We moved quickly to preserve the value of investors’ stake in a number of commercial and residential properties in Northern Virginia,” Melissa Hodgman, associate director of the SEC’s division of enforcement, said in a statement. “The total package of relief obtained in the settlement ensures that Hitt’s assets will be used to compensate harmed investors and will limit his ability to harm investors in the future.”

The court has yet to determine penalties and disgorgement, the SEC said.

Between 2014 and 2018, Hitt and Kiddar Capital allegedly raised millions from investors to fund various real estate projects and a startup venture. Hitt claimed the firm managed $1.4 billion in assets and invested its own money in projects to have “skin in the game,” but both of these statements were false, prosecutors said.

For one of their projects, Hitt and Kiddar Capital allegedly raised money to invest in a property near the Silver Line of the Washington, D.C., Metro. They misrepresented that they would put in $6 million of their own money, which persuaded a number of others to invest, according to prosecutors.

Prosecutors said Hitt ultimately raised more money than was needed for the D.C. property and used the excess money from investors for personal expenses.

Hitt and Kiddar separately raised $4.5 million to build homes in northern Virginia and misappropriated these funds as well, according to the SEC. Hitt allegedly kept for himself half of another $2 million he raised to invest in a startup.

Counsel information for the defendants was not available Friday.

The SEC is represented by its own Sarah Hall, Patrick Costello and Nicholas Margida.

The Virginia U.S. Attorney’s Office is represented by Mark D. Lytle.

The cases are SEC v. Todd Elliott Hitt et al., case number unavailable, and USA v. Todd Elliott Hitt, case number 1:18-mj-00480, both in the U.S. District Court for the Eastern District of Virginia.

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The team of investment fraud lawyers at Starr Austen & Miller LLP fights for the protection of investors and handles cases involving securities arbitration misrepresentation, overconcentration, broker fraud, negligence and breach of trust.

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