Former advisor Jeffrey Slothower, of Southampton, N.Y., was yesterday convicted by a federal jury of three counts of an indictment for wire fraud, investment advisor fraud and money laundering relating to his alleged theft of more than $1 million from two clients.
According to a statement by the U.S. Attorney’s Office Eastern Division of New York, Slothower faces as much as 30 years in prison.
“This case was about greed and betrayal of clients who trusted the defendant and thought their money was safely invested with him,” said U.S. Attorney Breon Peace in a press release. “Slothower tricked those clients so he could steal their money and lavish himself with a new car, high-end clothing and jewelry, and a membership at an East End country club.”
Slothower, who at one point was a broker with Goldman Sachs and Merrill Lynch, left the latter firm in January 2016. A Financial Industry Regulatory Authority investigation later alleged that Slothower settled a $355,000 loss with a client without Merrill’s knowledge, which is against Finra rules.
In 2016, Slothower spent five months at another firm, Private Client Services in New York, and then opened his own advisory firm, Battery Private. According to Battery Private’s latest Form ADV filed in April 2017, Slothower had $4 million in assets under management among 18 client accounts. The firm was terminated by the SEC later that year.
According to the December 2021 grand jury indictment in Slothower’s fraud case, the victims, noted as victims one and two, were a married couple. They had been clients of his at Merrill Lynch before he started his own business.
Beginning around 2016, Slothower solicited victim one by email, phone calls and text messages, pressuring them to invest with him, the indictment said. He allegedly told the victim one that he could earn a higher rate of return without any market risk.
Initially, victim one declined to give Slothower and Battery Private assets to invest. But in August 2016, Slothower persuaded victim two to hire him for advisory services, according to the indictment.
In January 2017, Slothower persisted in soliciting victim one, the indictment continued. Victim one eventually told him he was looking for a bond-type investment with a steady rate of return. Slothower told victim one he would invest his money in bonds backed by HOA fees, which he said would generate a return of 8% per year, paid quarterly.
Victim one agreed to invest with Slothower based on these representations, the indictment said.
Slothower sent victim one instructions for wiring his investment to Battery Private. He included a “cash agreement,” that said victim one’s investment would be held in the cash reserves of Battery Private. Victim one did not sign the agreement, the indictment said.
Victim one sent three money transfers to a designated bank account totaling $546,728 from three different banks. But Slothower neither invested those funds in the HOA bonds, nor did he move them to Battery Private’s cash reserves, the indictment said.
Instead, he allegedly misappropriated the assets by transferring more than $70,000 to his personal bank account, which were used to give money to his wife and mother and to pay down credit cards with which he had bought jewelry and luxury clothing. He also spent $125,000 on a Mercedes-Benz SUV; $19,000 for membership to a private golf course, the Long Island National Golf Club; and $13,432 to pay off his mother’s car loan. He used the remaining assets to buy real estate and securities in other companies.
To perpetuate his alleged fraud, Slothower had Battery Private make three quarterly payments to victim one representing the 8% annual return he would have gotten had his assets been invested in the HOA bonds.
Around December 2017, victim two, hearing from victim one about the HOA bonds and that Slothower had made good on his promise of quarterly payments, also decided to invest with Slothower.
However, Slothower said that victim two’s brokerage account at Battery Private could not be used to fund the HOA bond investment. Instead, she would have to liquidate the brokerage account, move the money to her personal checking account and then wire the money to the same bank account victim one had used.
Victim two’s brokerage account held approximately $540,000.
Slothower then misappropriated the funds, transferring $76,000 to his personal bank account and using more than $33,500 of that to pay credit card bills that included a $6,500 Chanel purse, a $13,000 Rolex watch and more than $11,000 in Ralph Lauren clothing, the Department of Justice statement said.
As with victim one, Slothower made a quarterly distribution to victim two.
In June 2018, victim one invested another $84,000 with Slothower, who used the money pay victim two, and used some to settle a bill at a private golf club and issue two payments back to victim one.
In November 2018, Slothower stopped making payments to the victims.
On November 30, victim one asked Slothower to return his and victim two’s investments, plus any earnings. Slothower declined, and instead offered to give them an alternative asset, the indictment said. Victim one refused. Slothower then said it would take a month to liquidate the victims’ funds, but then their investments would be returned to them.
In January 2019, victim one again asked for payment, and Slothower said it would be sent by the end of the month. At the end of February, Slothower assured them payment was imminent.
“Despite these representations, neither victim one nor victim two has received any additional payments from the defendant Jeffrey Slothower,” the indictment said.