70 investors lose $50 million to fraudsters posing as broker-dealers

A California man confirmed his role in a large-scale and long-running Internet-based fraud scheme that allowed him and other fraudsters to siphon roughly $50 million from dozens of investors over eight years, between 2012 to October 2020.

56-year-old Allen Giltman and his co-conspirators created fraudulent sites advertising various investment opportunities (primarily the purchase of certificates of deposit) to solicit money from investors via the internet.

"The Fraudulent Websites advertised higher than average rates of return on the CDs, which enhanced the attractiveness of the investment opportunities to potential victims," according to court documents.

"At times, the fraudulent websites were designed to closely resemble websites being operated by actual, well-known, and publicly reputable financial institutions; at other times, the fraudulent websites were designed to resemble legitimate-seeming financial institutions that did not exist."

They promoted the fraudulent investment sites via ads on Google and Microsoft Bing search results for searches, including phrases such as "best CD rates" or "highest cd rates."

70 victims baited using 150 scam sites

In conversations with victims who reached out for investment opportunities, the fraudsters impersonated FINRA broker-dealers claiming to be employed by the financial institutions they spoofed on the scam sites.

During their fraud schemes, they used various means to hide their true identities, including virtual private networks (VPNs), prepaid gift cards to register web domains, prepaid phone and encrypted apps to communicate with their targets, and fake invoices to explain the large wire transfers they received from their victims.

"To date, law enforcement has identified at least 150 fraudulent websites created as part of the scheme," the Justice Department said today.

"At least 70 victims of the fraud scheme nationwide, including in New Jersey, collectively transmitted approximately $50 million that they believed to be investments."

The wire fraud conspiracy charge Giltman admitted to today a maximum penalty of 20 years and the securities fraud charge carries a maximum penalty of five years in prison.

Both of them also come with $250,000 fines or double the gross amount of gain or loss from the offense, whichever is greatest. Giltman will receive his sentence on May 10, 2022.

Warnings of scammers impersonating registered brokers

In July 2021, the FBI's Criminal Investigative Division and the Securities and Exchange Commission warned investors of fraudsters impersonating registered investment professionals such as brokers and investment advisers.

"Fraudsters may falsely claim to be registered with the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) or a state securities regulator in order to lure investors into scams, or even impersonate real investment professionals who actually are registered with these organizations," the FBI and SEC said.

The July alert followed a similar fraud alert issued by FINRA the same week about broker imposter scams using phishing sites impersonating brokers and doctored SEC or FINRA registration documents.

Investors are advised first to check if those promoting investment opportunities are licensed or registered with the Investor.gov search tool and confirm they're not scammers by reaching out to the seller using independently verified contact info from the firm's Client Relationship Summary (Form CRS).

They should also always check for the following warning signs of an investment scam:

Guaranteed high investment returns: Promises of high investment returns – often accompanied by a guarantee of little or no risk – is a classic sign of fraud. Every investment has risk, and the potential for high returns usually comes with increased risk. Unsolicited offers: Unsolicited offers (you didn't ask for it and don't know the sender) to earn investment returns that seem "too good to be true" may be part of a scam. Red flags in investment payment methods: credit cards, digital asset wallets and "cryptocurrencies," wire transfers, and checks.