The United States Securities and Exchange Commission (SEC) today filed a complaint against Joshua Louis Rupp, charging him with securities fraud.
The complaint, submitted at the Michigan Western District Court, alleges that, from January 2018 through July 2019, Rupp engaged in a fraudulent investment scheme that included misstatements, false documents and misappropriation of investor funds. He raised over $2.2 million from about 20 investors to trade securities on their behalf.
Rupp told a number of investors their money would be pooled with other investors’ money.
According to the complaint, Rupp solicited investments by means of various false statements, including that he was a licensed securities professional, investors’ principal was protected from losses, and he would generate profits for investors. Rupp provided to investors fake documents purporting to show he was associated with a licensed broker-dealer.
Rupp also provided investors false account statements and false trading data to make it appear that his trading on their behalf was generating positive returns.
In reality, Rupp was not licensed in the securities industry or affiliated with any brokerage firm, his securities trading resulted in significant losses, and he misappropriated and misused hundreds of thousands of dollars of investor funds. Investors lost most of their money, including retirement funds, through Rupp’s fraud.
Rupp engaged in frequent securities trading in his and certain investors’ brokerage accounts. He used investor funds to buy and sell stocks listed on the New York Stock Exchange and NASDAQ and trade in options, including stock options and S&P 500 index options.
His securities trading resulted in over $1.4 million in losses.
He also diverted to himself a substantial portion of the invested funds, which was contrary to his representations to investors that their money would be safe and used for trading. For instance, Rupp routinely used cash held in the brokerage accounts in his and IMS’s names to make purchases from retailers including BestBuy, Home Depot, Meijer, Walmart and Disney Resorts. For example, on July 24, 2018, Rupp used his brokerage account to make a $2,503 payment to Walmart. On December 10, 2018, Rupp used IMS’s brokerage account to make a $1,786 payment to Disney Resorts.
The SEC alleges that Rupp violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], and the broker registration provision of Section 15(a) of the Exchange Act [15 U.S.C. § 78o(a)] and unless restrained and enjoined will engage in future violations of these provisions.
The Commission seeks an order enjoining Rupp from future violations of these provisions, requiring him to disgorge his ill-gotten gains plus prejudgment interest, and imposing a monetary penalty.