Next Financial Group Broker Douglas Simanski Guilty Of Fraud

Soreide Law Group is investigating claims on behalf of investors who purchased investments from Douglas Simanski (CRD#: 2606998, Altoona, Pennsylvania), a former Next Financial Group, Inc. registered representative and investment advisor. The United States Attorney’s Office for the Western District of Pennsylvania announced on November 3, 2018 that Simanski pleaded guilty to securities fraud and wire fraud in connection with concocting and executing three different fraudulent schemes that victimized his elderly customers from the Altoona, Pennsylvania area.
On October 1, 2018, the United States Attorney’s Office charged Simanski with securities fraud (15 U.S.C. §§ 78(j)(b) and 78ff(a), 17 C.F.R. 240.10b-5), wire fraud (26 U.S.C. § 7206(1)) and three counts of filing a false income tax return (18 U.S.C. § 1343) in Case #18-cr-00020, brought in the United States District Court for the Western District of Pennsylvania. Simanski pleaded guilty to those felony charges.

SEC Charges Douglas Simanski With Securities Fraud

In a similar matter, on November 2, 2018, the Securities and Exchange Commission (“SEC”) charged Simanski with committing a securities offering fraud. The SEC stated that from 2002 to 2016, when Simanski was a Next Financial Group, Inc. registered representative and investment adviser, he caused 27 investors to hand him $3,900,000 for investments based on false statements about investment opportunities. Simanski purportedly told investors that he would be placing their money in either: (1) coal mining companies; (2) a tax-free investments paying investors a fixed return; or (3) a rental car enterprise.
The SEC stated that Simanski raised the money from vulnerable, elderly and retired customers who trusted him with their investments. The Complaint stated that Simanski knew at the time he raised the money from those customers that the investments were not real, and that he would not be investing their funds according to his promises and representations. At the time that Simanski convinced the customers to hand him the money to invest, Simanski apparently had no plans to invest the customers’ funds. Simanski instead planned to use the investors’ funds to pay his expenses, or otherwise pay back previous investors.

First Fraudulent Scheme Allegedly Committed By Douglas Simanski

Specifically, the first fraudulent scheme concerned Simanski soliciting investors to invest in two different coal mining companies, Black Diamond Mining, Inc. and Molesavitch Coal Company, from 2011 to 2015. Simanski sold notes evidenced only by a one-page document which promised investors at least 5% annual rates of returns. The notes stated that Simanski personally contained an interest in the mining companies, and that he was guaranteeing repayment on those notes.
Simanski then deposited investors’ checks into his wife’s bank account, and pooled investors’ funds in a personal brokerage account, all the while knowing that he would not make the investment in those mining companies. The SEC claimed that Simanski did transfer investors’ funds to the mining companies, and did not use investor funds for any expenses in connection with the mining companies. Instead, the SEC stated, Simanski stole the investors’ money and used it to repay other investors and pay down his expenses.

Second Fraudulent Scheme Allegedly Committed By Douglas Simanski

Simanski’s second fraudulent scheme took place from 2002 to 2016. He duped investors into providing him funds by promising them attractive, tax-free returns. Those investors included Simanski’s elderly and unsophisticated customers, some of which invested through Simanski for years. From the SEC’s perspective, Simanski had loosely described the plans for the investors’ money – he merely claimed that he would put the money in his trading account, and generate returns that he would pass along to the investors without them having to deal with tax consequences.
Simanski apparently provided investors a one-page agreement with a title “Tax Free Investment," stating an amount that the investor would contribute, as well as the terms of repayment and interest that would be provided. He then established a brokerage account and checking account in the name of his wife. Simanski reportedly failed to furnish Next Financial Group with information about this account being used to conduct an outside activity.
Just like with the other fraudulent scheme, Simanski supposedly had no intention of actually investing the funds according to his promises to investors. The Complaint indicated that he had paid his personal expenses or paid off prior investors, making it appear as though the investments effectively performed. Simanski’s actions were indicative of a Ponzi-scheme, the SEC stated. In addition, the Complaint stated that the investors’ returns were taxable, contrary to his assertions. That is, the few securities that Simanski traded were neither tax-exempt nor tax-free.

Third Fraudulent Scheme Allegedly Committed By Douglas Simanski

A third scheme reportedly perpetrated by Simanski concerned a fake car rental car company that he claimed to have a business interest in. From October 2014 to May 2016, Simanski persuaded investors to provide him money so that the investors could invest in “Payless Rent A Car” to support the company’s operations. According to the SEC, Simanski persuaded investors to commit the funds by promising 5% returns, which were apparently more attractive than returns provided by other investments offered by Next Financial Group at the time. The Complaint alleged that Simanski did not place the investors’ funds into Payless Rent A Car. Much like with the other schemes, Simanski brought investors’ funds together into an account, and ultimately stole their funds.
The Complaint further stated that Simanski concealed the fraud by putting the investors’ money in his wife’s bank accounts and brokerage accounts. By May 2016, one of Simanski’s customers complained to Financial Industry Regulatory Authority (“FINRA”) about possibly being defrauded after Simanski failed to repay the customer.

FINRA Bars Douglas Simanski

The SEC noted that FINRA sent Simanski a letter requesting information from him about his activities and his clients; however, Simanski did not respond. FINRA barred Simanski for failing to provide the materials requested by FINRA. Subsequently, Simanski allegedly admitted to Next Financial Company’s Altoona office management that he had been running a fraudulent scheme. The SEC stated that Simanski also told a Next Financial Group registered representative that he raised money from investors by offering them “fake Certificate of Deposits”.
The SEC indicated that 26 of the investors maintained funds with Simanski at the time that Next Financial Group terminated him for selling phony investments and stealing customer funds. Simanski’s fraud caused investors to incur $2,600,000.00 in investment losses. Consequently, between June 2, 2016 and September 18, 2017, 23 customer-initiated investment-related disputes have been filed by customers of Simanski, according to FINRA BrokerCheck. SEC charged Simanski with violating Section 10(b) of the Securities Exchange Act, Rule 10b-5, Section 17(a) of the Securities Act, Section 206 of the Investment Advisers Act, and Rule 206(4)-8.
Investors who have fallen victim to Douglas P. Simanski’s fraudulent schemes are encouraged to contact Soreide Law Group at (888) 929-3404 to discuss the potential recovery of investment losses. There is no fee unless a recovery is made. Soreide Law Group represents investors nationwide.