The Securities and Exchange Commission said Monday it has charged Acorn Capital Management and its principal Donald Anthony Walker Young with misappropriating more than $23 million in client assets through a Ponzi scheme.
The government has obtained an emergency court order freezing the assets Young of Coatesville, Pa., and Acorn.
A lawyer for Young, Paul Huey-Burns of the Dechert firm, said he was reviewing the SEC's filing but had no further comment.
The SEC alleges that through a commingled brokerage account, Young and Acorn misappropriated funds from investors buying limited partnership interests in Acorn II LP, which invested in publicly traded securities. Young used investor funds to pay other investors in the nature of a Ponzi scheme, and directly stole some of the money to buy a vacation home in Palm Beach, Fla., and pay personal expenses related to horse ownership and racing, construction, boats, limousines, chartered aircraft and other luxuries, the SEC said.
According to the SEC’s complaint, the defendants refused to provide SEC staff with client files, account statements, general ledgers and other documents that are required by law to be maintained and produced by registered investment advisers.
“Young covered up his thefts by giving phony information to accountants who kept track of each investor’s capital balance, and giving false statements to investors that didn't reflect the thefts,” said Robert Khuzami, director of the SEC's Division of Enforcement. “Young led investors to believe their money was being invested properly when in reality he was spending it unscrupulously.”
Daniel M. Hawke, director of the SEC's Philadelphia Regional Office, said, “Young repeatedly refused to provide commission staff with required documents that would have revealed his scheme. The staff has gone to great lengths to develop the evidence necessary to halt this fraud.”
U.S. District Judge John R. Padova issued an order on Friday granting a temporary restraining order, freezing assets and imposing other emergency relief for investors.
The SEC alleges that although the Acorn II LP account holds about $3 million for about 40 investors, Young has told investors through quarterly and annual statements that their account balances are much higher. In February, the SEC said Young gave phony documents to employees at the broker-dealer to deceive them into believing that Acorn II LP held an additional $23 million at two other broker-dealers.
