February 21, 2024

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Broker settles with SEC after luring investors into fake tax-exempt bonds

2 min read
Broker settles with SEC after luring investors into fake tax-exempt bonds

Joliet, Illinois-based broker dealer Ronald Molo has entered into a final judgment with the Securities and Exchange Commission for his role in defrauding three investors out of $800,000 by luring them into nonexistent tax-exempt bonds.

Molo has been ordered to pay $815,104 in disgorgement and prejudgment interest and has been permanently barred from participating in the issuance, purchase, offer or sale of any security.

The SEC alleged that between January 2019 and November 2020, Molo stole $250,000 and $300,000 respectively from two of his investment advisory clients and another $250,000 from a brokerage firm customer.

The investors were Molo’s longstanding clients and he proposed the investments during regularly scheduled meetings, telephone calls, and casual gatherings, without providing them with any sort of written materials on the investments.

“Without the investors’ knowledge or authorization, Molo stole a total of $800,000 of their money by convincing them to transfer money out of their financial institution accounts for the purported investment in tax-free bonds,” the complaint said. “Molo did not tell the investors that he owned the account to which he directed them to transfer their money.”

He then misused at least $778,000 of the investors’ money for his own personal use and tried to cover up the fraud by sending $22,000 of the investors’ money back for supposed interest payments from the nonexistent bonds.

Molo’s personal uses from the stolen money included $132,457 to pay the mortgage of a relative, $116,812 for his own mortgage payments, $80,920 to pay Molo’s attorney in connection with a previous lawsuit, $52,000 for his relatives, $39,053 for the purchase and repair of automobiles, $28,675 to Molo’s housing association, $25,636 for renovations to his own house and $15,289 in cash withdrawals.

Molo used cashier’s checks from his bank funded with the money drawn down from his own personal account to pay the interest checks to investors.

“In all but one instance, white out, or something similar, obscured the remitter line on the check,” the complaint said. “The remitter line would have shown that Molo, not the issuer, provided the money to fund the cashier’s check.”

The scheme became evident when one of Molo’s investors called his Edward Jones office because she had not received an interest check for Q2 2021.

“An employee of the financial institution tried to address the issue for the investor but could not find any information about the purported bond issuer in the investor’s file or elsewhere,” the complaint said. “The employee left a note for Molo on the financial institution’s internal communication system, but Molo deleted it and did not contact the investor.”

Molo’s employer Edward Jones then conducted an investigation and after interviewing Molo, determined that he hadn’t invested the money in the bonds he claimed. He was fired and Edward Jones reimbursed the investors for the money Molo misappropriated.