The Financial Industry Regulatory Authority says that Thornes & Associates Inc. Investment Securities President John Thomas Thornes lent $4.2 million in client assets to two friends. Following the resolution of the FINRA arbitration case, the California broker is barred from the securities industry and his broker-dealer has been suspended, as well was expelled as a member of the SRO.
The friends who received the “loans”-over 50 transactions-allegedly spent the assets on cars, vacation homes, and plane and jet rentals. Over $262,000 is said to have been turned into cashier’s checks and used at an Indian casino.
Per FINRA’s complaint, however, calling the transfer of money a “loan” was not an accurate characterization, and not only were they unsecured and undocumented transactions but also they were never paid back.
The transfers purportedly took place over a two-year period. The SRO says that the “loans” issued to Thornes’ two friends came with 15-20% interest charges and even when they were past due, he kept sending more money to one of the friends.
Named as a victim of the alleged broker fraud is A 77-year-old widow suffering from dementia and needing 24-hour nursing care. Her financial support is dependent on a trust fund that Thornes administers, one that just two years go was valued at over $2 million value in municipal bonds, cash, and mutual funds. Now, its worth has gone done by $1.5 million.
Another alleged victim of Thornes is the HS Trust Brokerage Account, which was established to offer college scholarships. After losing over $2.6 million, it now contains just $140,000.
Investigators believe that the loans were indicators of suspicious activity and the firm should have reported them through its anti-money laundering (“AML”) compliance program.” FINRA said that Thornes’ financial firm failed to probe the red flags and implement polices, controls, and procedures that complied with the Bank Secrecy Act.
Meantime, Thornes’ lawyer argued that FINRA should have instead been pursuing one of the friends who did not pay back the loans. He noted that Thornes even sued this person for repayment.
If you suspect that your losses are due to broker-dealer fraud, you should contact an experienced securities law firm right away. Unfortunately, investors of all age can be the target of a financial scam and/or broker misconduct.
That said, elderly seniors are especially vulnerable, in particular if they are suffering from dementia or other health issues that can prevent them from knowing when they are being bilked. This can prove detrimental, especially if that elderly investor is relying upon his/her investments as financial support and/or to pay for medical/nursing bills. You may want to speak to an elder financial fraud attorney on your loved one’s behalf.
Broker barred for stealing $4.2 million from two clients, Investment News, July 22, 2013
REDLANDS: Investor lent friends $4.2 million in clients’ funds, complaint says, The Press Enterprise, May 29, 2013
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FINRA Reports Losses After Squandering Profit From NYSE Payment, Stockbroker Fraud Blog, July 23, 2013
DOJ’s $5B Securities Lawsuit Against Standard & Poor’s Can Proceed, Says Judge, Institutional Investor Securities Blog, July 22, 2013