Ponzi Scheme Rip-Off! Millions Vanish, Adviser Hid Criminal Past!

SEC v. Dow Rockwell LLC and Richard Dow Rockwell — U.S. Securities and Exchange Commission Litigation Release No. 26185, dated December 3, 2024.

The SEC charged Dow Rockwell LLC and its owner, Richard Dow Rockwell, for failing to disclose conflicts of interest and compensation related to their solicitation of investments in Professional Financial Investors, Inc. (PFI), a real estate company that operated as a Ponzi scheme. The defendants also failed to disclose PFI’s founder’s criminal conviction and acted as unregistered broker-dealers. Final judgments were entered, permanently enjoining them from future violations and ordering them to pay disgorgement, prejudgment interest, and a civil penalty.

In Plain English

Imagine you're a financial advisor helping friends invest. You recommended a real estate investment, but you didn't tell them you were getting paid extra by the real estate company for each person you sent their way. You also didn't mention that the company's leader had a criminal past. The SEC stepped in because this secret payment is a conflict of interest, and you weren't properly registered to sell these investments. As a result, you've been ordered to pay back the money you improperly earned, plus interest and a penalty.

Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.

How the Alleged Scheme Worked

1. Soliciting Investments in a Real Estate Scheme Dow Rockwell LLC and its owner, Richard Dow Rockwell, acted as investment advisers. They solicited and recommended investments in Professional Financial Investors, Inc. (PFI), a real estate company.
2. Operating as a Ponzi Scheme PFI was not a legitimate investment; it was a Ponzi scheme. This means that money from new investors was used to pay back earlier investors, rather than being used for actual investments.
3. Misappropriating Investor Funds Executives at PFI misappropriated more than $35 million in investor funds. This money was stolen or misused, rather than being invested as promised.
4. Failing to Disclose Compensation Dow Rockwell LLC and Richard Dow Rockwell received undisclosed compensation for recommending PFI securities to their clients. They did not inform their clients about this extra payment they received from PFI.
5. Hiding Criminal Convictions The defendants also failed to disclose that PFI's founder had a past criminal conviction. This was a critical piece of information that clients should have known when considering an investment.
6. Operating as Unregistered Broker-Dealers During the time they were selling PFI securities, neither Dow Rockwell LLC nor Richard Dow Rockwell were registered as broker-dealers with the SEC. They also were not associated with any registered broker-dealer, meaning they were operating illegally.

The Enforcement Action

On November 25, 2024, the U.S. District Court for the Northern District of California entered final consent judgments against Dow Rockwell LLC and Richard Dow Rockwell. The judgments resolve the SEC’s March 31, 2022 complaint alleging undisclosed conflicts of interest, failure to disclose PFI founder’s criminal conviction, and operating as unregistered broker-dealers in connection with PFI, a real estate Ponzi scheme. The defendants were permanently enjoined from future violations of the Investment Advisers Act of 1940, the Securities Act of 1933, and the Securities Exchange Act of 1934. They were ordered to pay, jointly and severally, disgorgement of $402,075 plus $121,843.85 in prejudgment interest, and an $80,000 civil penalty.

Named in this action: Dow Rockwell LLC and Richard Dow Rockwell.

Original SEC litigation release ↗ · Browse all cases