FINRA barred former Western International Securities broker Bradley Carl Mascho for refusing to cooperate with an investigation into SEC allegations that he aided and abetted DJB Holdings aka DJBennett and founder Dawn J Bennett's firm, Bennett Group Financial Services, in fraudulently raising $20 million from 46 investors from 2014 through 2017, occasionally relying on a Ponzi scheme set-up to further the fraudulent cause and target elderly investors.
FINRA previously barred Bennett, also formerly of Western International Securities, for refusing to cooperate with an investigation into charges of conversion, fraud, and private securities transactions; Western International permitted Bennett to resign in 2015 following discovery of undisclosed promissory notes, while Mascho voluntarily resigned in December 2017 shortly after the SEC filed its complaint.
AWC #2015047682403 / SEC's Complaint #17-cv-02453-PX
According to the December 2017 SEC complaint, Bennett and DJBennett Chief Financial Officer Bradley C Mascho fraudulently misrepresented and omitted material facts regarding the company's financial condition and operating performance in an unregistered offering of DJBennett convertible notes, despite purportedly knowing full well that DJBennett "had never realized a profit" and had actually recorded millions of dollars in losses year over year since its 2010 inception.
For example, the SEC found that DJBennett's year-end 2015 financial report overstated gross profit by nearly $2.5 million, or 3,382%, while overstating net income by over $6.1 million (124%) and inaccurately reflecting a profit of $1.1 million rather than the actual loss of nearly $5 million.
The complaint alleges that in an attempt to fund an "extravagant lifestyle" and sustain her failing DJBennett business, the former "Financial Myth Busting with Dawn Bennett" radio host alongside CFO Mascho turned to illicit convertible and promissory note sales, fraudulently obtaining several loans by using fake brokerage statements that inflated Bennett's assets.
The duo "frequently targeted elderly and financially unsophisticated investors," according to the complaint, materially misrepresenting the company's profitability and illicitly claiming the company had the resources to pay annual returns of up to 15%. The SEC found that many of the elderly and financially unsophisticated individuals invested all or a portion of their life savings into the ill-fated DJBennett Convertible Notes.
In regard to the promissory notes, Bennett and Mascho purportedly sought to remove the notes from regulatory oversight by shortening their term to nine months, replacing the subject-to-reguation Convertible Notes with the short-term promissory notes, so as to avoid detection and create the false impression that the Convertible Notes never existed, while illicitly backdating the sham promissory notes to the day the investors made their original investments in the DJBennett Convertibles.
Investigators alleged that Bennett and Mascho treated these "short-term notes" as long-term investments, encouraging clients not to redeem the promissory notes after nine months while purportedly admitting to at least one investor that the nine-month promissory notes were, indeed, intended to extend beyond nine months.
The SEC also alleged that Bennett and Mascho improperly diverted at least $10 million in investor funds to pay off earlier investors in a Ponzi scheme-like fashion, and to finance a variety of personal luxuries, including jewelry, high-end clothing, and a $500,000 annual lease on a luxury suite at the Dallas Cowboys' AT&T Stadium.
Bennett's BrokerCheck report reflects a growing list of customer disputes alleging misrepresentation, unsuitable recommendations, breach of fiduciary duty, negligence, and fraud. Several of these disputes have already been settled or have resulted in an award.
If you have invested with ex-Western International Securities brokers Dawn J Bennett or Bradley Carl Mascho, or with their companies, Bennett Group Financial Services, Mascho Associates, LLC, or DJB Holdings aka DJBennett, and their convertible or promissory notes have proven harmful to your investments or interests, please call The Law Offices of Jonathan W. Evans & Associates at (800) 699-1881 for an investigation and consultation.