The Securities and Exchange Commission (SEC) has charged Massachusetts resident Jonathan Webb for defrauding investors in a securities offering that included low-income cemetery employees.
Webb has agreed to settle the case and to pay almost $400,000 in monetary relief.
According to the SEC’s complaint, from at least January 2021 to August 2023, Webb solicited and accepted approximately $1.7 million from at least 34 people for investment purposes.
Webb began working as an arborist at a Massachusetts cemetery in 1994 and by 2019 had become a supervisor of tree maintenance. Webb had no investment experience or training beyond his workplace retirement account and his trading of securities in a personal trading account.
In approximately 2019, Webb attended a two-week course for the purpose of learning about online trading in his personal accounts. The second week of the course focused on trading in the Forex market. After taking the course, Webb proceeded to use his own money to trade Forex, achieving both gains and losses over time.
After attending the online trading course, Webb learned from online sources that if he used certain overseas brokerage firms he could trade Forex with leverage of up to 500:1.
The term “leverage” at the overseas brokerage firms did not involve the customer borrowing funds to trade. Rather, the firm allowed the customer to trade a larger position. One overseas brokerage firm’s website stated, “For example, with $1,000 in your trading account and leverage of 200:1, you can have trading capacity of $200,000.” Webb understood that this allowed for the potential of greater gains, but also increased the risk of loss. The firms limited any losses to the initial investment.
After attending the online trading course, Webb also read online information about “Forex Expert Advisors,” software trading programs which claim to execute automatic Forex trading strategies according to a computer programmed algorithm.
Webb particularly focused on the software trading program called “Barclays Expert Advisor,” as it advertised gains of 15% per month over many years with very small losses. Webb’s due diligence on the Barclays Expert Advisor software was limited to reviewing publicly available websites and the Barclays Expert Advisor website. A well-known international financial institution known as Barclays plc or Barclays Bank has no connection with the website or with the Barclays Expert Advisor software.
Webb discussed his Forex investments with employees of the cemetery and also with his church community where he was the president and a board member. He told people that he could earn extravagant returns doing Forex trading and that they could as well. He told the employees and church members that if they invested their money with him, he would return the money they invested plus any interest earned in one year.
Beginning in at least January 2021, Webb began soliciting and accepting money from employees, church members and friends for purposes of investing in Forex. Webb had known many of the investors as employees, church members or friends for decades. Many of the employees were low-wage workers who reported to Webb at the cemetery.
Individuals invested tens of thousands of dollars with Webb. When potential investors did not have the savings to invest, Webb helped individuals take out personal loans of as much as $50,000 and even promised to make the monthly payments owed on the loans.
At least 34 individuals invested approximately $1.7 million with Webb from at from at least January 1, 2021 to August 2023. Several of the investments were provided to Webb cash in-hand. Webb had virtually no system for recording the names of investors, amounts invested, dates of investment, investment returns or amounts paid back to investors.
Webb also did not keep track of nor did he record the amount of investor funds actually invested in Forex.
By August 2023, the complaint alleges, Webb had lost most of the investor funds he had received by investing in Forex. In addition, according to the SEC complaint, Webb used investor funds to pay back some earlier investors and misappropriated funds for personal expenses.
The SEC’s complaint, filed in the United States District Court for the District of Massachusetts, charges Webb with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder.
Without admitting or denying the allegations in the complaint, Webb has consented to a permanent injunction from violating those provisions, a conduct-based injunction, disgorgement of $250,753 plus prejudgment interest of $29,391, and a civil monetary penalty of $118,225. The settlement is subject to court approval.
