Brenda Smith, an investment advisor, pled guilty previously to securities fraud and was sentenced to 109 months imprisonment for selling Broad Reach Capital LP investments. She was also ordered to pay $47.2 Million in restitution in parallel criminal cases. In August 2019, the SEC filed a civil complaint against Smith.
On May 4, 2022, Brenda Smith, a Pennsylvania investment adviser charged by the Securities and Exchange Commission with defrauding investors and who previously pled guilty to securities fraud, was sentenced to 109 months in prison and ordered to pay $47.2 million in restitution in a parallel criminal case.
The criminal charges against Smith arose from the same conduct alleged in the SEC’s complaint against Smith and entities she controlled, defendants Broad Reach Capital, LP, Broad Reach Partners, LLC, and Bristol Advisors, LLC. The SEC’s complaint alleged that Smith and her fund Broad Reach Capital, LP, raised approximately $105 million from approximately 40 investors by representing that she would invest their money in publicly traded securities through various trading strategies that she championed as providing consistently high returns. However, the complaint alleges that Smith made very few investments in these trading strategies, and instead largely used investors’ money to repay other investors and for her own personal investments. The complaint alleges further that Smith, and the entities she controlled, disseminated false statements touting positive returns and fabricated documents in an attempt to inflate Broad Reach’s assets and lull investors into believing their capital was safe. At the time it filed the complaint, the SEC also obtained an emergency asset freeze and later obtained a preliminary injunction extending the freeze. Subsequently, upon the SEC’s motion, the Court appointed a Receiver over the entity defendants and other related entities. The SEC’s civil action remains pending.
Between February 2016 and August 2019, Smith and Broad Reach Capital, her investment fund, raised approximately $105,000,000 from 40 investors. She promised to invest in publicly traded securities using various trading strategies that would consistently provide high returns.
Broad Reach Capital, a Regulation D Fund established in February 2016, is open to accredited investors who have a minimum of $1 million.
Smith is accused of making very few investments in the trading strategies and instead of using investors’ money for personal investments and to repay investors.
Smith allegedly also created documents to exaggerate Broad Reach’s assets. Broad Reach was also mentioned in written materials sent to potential investors. These documents included historical information about Broad Reach. They claimed annual returns of over 33 percent. The presentation and tearsheet for 2018 showed a return rate of 6.07 percent over the first three months of 2018. This includes again in February 2018, according to the SEC.
The fund’s brokerage accounts suffered “massive losses” in February 2018. According to reports, the primary Broad Reach account lost more than 50% of its value and dropped from $17.7million to $8.8million by the end.
The SEC filed the complaint and received an emergency asset freeze. Later, it obtained a preliminary injunction that extended the freeze. The court-appointed a receiver to supervise the defendants and related entities.