Securities Feds File Civil Suit Accusing Two Texas Lawyers With Raiding Client Escrow Accounts To The Tune Of $13.8 Million

In Washington D.C., the U.S. Securities & Exchange Commission recently announced:

• The Securities and Exchange Commission [] announced fraud charges against two attorneys accused of making undisclosed risky investments and in some instances outright stealing money they obtained in escrow accounts from small business owners seeking commercial loans.
  
  The SEC alleges that Jay Mac Rust and Christopher K. Brenner collected $13.8 million acting as escrow agents between their clients and a purported loan company called Atlantic Rim Funding.
  
  Rust and Brenner assured clients that their deposits of 10 percent of the desired loan amount would be held safe and only used to purchase liquid, government-backed securities that Atlantic would then leverage to obtain their loans.
  
  According to the SEC’s complaint, Atlantic had no ability or intention to obtain these loans. Yet when that became obvious to Rust and Brenner they each continued to make misrepresentations to clients and collected more money anyway. Rust siphoned $662,000 and Brenner took $595,000 in client funds to pay themselves and others, and they gambled on risky securities derivatives with the remainder of the money.
  
  Rust and Brenner each opened numerous securities accounts at broker-dealers to make these trades, and avoided scrutiny by lying that the money being used was their own cash rather than client assets.
  
  SEC examiners detected the scheme when examining one of the brokerage firms where trades were being placed.
  
  “We allege that these attorneys betrayed the trust of their clients by luring them with promises of small business loans that never materialized. They continued to recruit new escrow clients to repay earlier clients and did everything but keep client money safe as they represented they would,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.

For the press release, see SEC Charges Two Attorneys With Defrauding Escrow Clients.

See also, CFO.com: Texas Attorneys Accused in $13M Escrow Scam (The SEC says J. Mac Rust and Christopher Benner siphoned off client funds to pay themselves and invest in risky securities).

For the SEC lawsuit, see Securities & Exchange Commission v. Rust, et al.