SEC v. Deer Hill Financial Group, LLC and Stephen B. Blankenship, Case No. 3:12-cv-01317 (D. Conn.) On September 13, 2012, the SEC announced it charged Stephen Blankenship and his company with stealing $600,000 from customers. Most of the investors deceived by Blankenship were his brokerage customers, some for long periods of time. Blankenship talked customers into withdrawing money from their brokerage accounts promising that he could achieve better returns by investing their money through Deer Hill. Blankenship created fake account statements that made it appear as though he invested their money. However, the investments described on the account statements did not exist. Instead, Blankenship took the money to pay for personal expenses. He also made Ponzi-like payments to some customers to make it appear as if there was a return on their investments. Blankenship is charged with violating section 17(a) of the Securities Act, 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Advisers Act. The SEC seeks disgorgement of ill-gotten gains plus prejudgment interest, civil monetary penalties, and injunctive relief.
The U.S. Attorney’s Office for the District of Connecticut charged Blankenship with criminal violations. Also, the Connecticut Department of Banking’s Securities Division has obtained, by consent, a revocation of Blankenship’s registration and has barred Blankenship and Deer Hill from operating in Connecticut.