Securities and Exchange Commission charges investment advisor with defrauding sports clients for undisclosed fees and high risk investments

The Securities and Exchange Commission charged Douglas Elstun, an investment advisor serving pro athletes, with defrauding his clients with undisclosed fees and misleading them about a high-risk investment strategy. Elston operated registered investment advisor (RIA) Crossroads Financial Management and billed clients annual fees as high as 1.25% of assets under management, above the 1% maximum that the clients had agreed to pay. He also allegedly padded those fees by applying the advisory fee to non-advisory assets, including bank account balances, equity in homes and other real estate, and the value of vehicles, the SEC said. After the agency began investigating, Elstun produced forged account agreements purportedly authorizing the excessive fees.

According to the SEC, Elstun also breached his fiduciary duty by investing the majority of his advisory clients–including several senior citizens–in risky daily leveraged and inverse ETFs and held the investments for long periods of time, costing his clients millions in losses, the SEC said. The investments, which he improperly pitched to conservative clients, included UVXY, which had aimed to correspond to double the daily performance of the S&P 500 short-term futures index, and the ProShares Short VIX Short-Term Futures ETF, according to the SEC’s complaint. The prospectuses for these ETFs cautioned that they were intended only for sophisticated investors and were generally intended only for short-term holdings, but Elstun held the ETFs in his clients’ accounts for months, and in many cases, years.

Elstun, who had played college basketball, recruited athletes as advisory clients and also worked with dozens of other wealthy individuals as well as “a few” charities and endowments.

Since 2019, he has been registered with Frontier Wealth Management, a Kansas City, Missouri, RIA founded in 2007 that has almost $3 billion in assets, according to its most recent ADV filing in June of last year.

 

 

JEFFREY NEWMAN REPRESENTS WHISTLEBLOWERS NATIONWIDE, INCLUDING IN THE SECURITIES AND EXCHANGE WHISTLEBLOWER PROGRAM. HE CAN BE REACHED AT jnewman@newmanshapiro.com or 617-823-3217