A Lyme man has received 40 months of jail time and 150 hours of community service for defrauding investors in a "cherry-picking" investment scheme.
Noah L. Myers, age 43, was sentenced on Monday by U.S. District Judge Stefan R. Underhill in Bridgeport, according to a statement from the office of Deirdre M. Daly, U.S. Attorney for the District of Connecticut.
"Investors have a right to the fair and ethical management of their savings," Daly said in a statement. "The sentence imposed today serves as ample warning that money managers who breach their clients’ trust in violation of federal securities laws will be prosecuted and risk losing their freedom and ill-gotten gains. We thank the FBI and the SEC for their efforts in uncovering this cherry-picking scheme."
Myers was the sole owner of MiddleCove Capital LLC, which had been registered as an investment advisor with the U.S. Securities and Exchange Commission (SEC) since 2008, Daly’s office said. In that capacity, Myers managed a number of client accounts with assets of approximately $129 million and used Charles Schwab & Co. to trade securities and as the custodian of the investments held in client accounts.
As part of the trading arrangement with Schwab, Myers was permitted to place block purchases and sales of securities through a master account with Schwab and then, later in the day, allocate the purchases and sales to various accounts, including his personal accounts and various client accounts, all held by Schwab, Daly’s office said.
Authorities said that between April 2009 and November 2010, Myers engaged in "cherry-picking" at MiddleCove by purchasing the leveraged exchange traded fund (ETF) ProShares UltraShort Financials and other securities. He then disproportionately allocated trades that had appreciated in value during the course of the day to his personal and business accounts, and allocated trades that had depreciated in value during the day to the accounts of his advisory clients. As a result, Myers gained as his clients suffered commensurate trading losses, Daly’s office said.
In filings with the SEC in April 2009 and March 2010, Myers and MiddleCove represented that batched trades would be allocated fairly and not unduly favor Myers or MiddleCove.
On Jan. 16, 2013, the SEC issued an order revoking the registration of MiddleCove as an investment adviser and barred Myers from the securities industry. He also was ordered to pay $462,022 disgorgement, $26,096 in prejudgment interest, and a civil penalty of $300,000.
In October of 2014, Myers waived his right to indictment and pleaded guilty to one count of security fraud. This case was investigated by the Federal Bureau of Investigation with the substantial assistance of the U.S. Securities and Exchange Commission. The case was prosecuted by Assistant U.S. Attorney Christopher W. Schmeisser.
