15-year sentence for client fraud: Former N.J. broker stole $9.8M from clients

IDFPR: "Unfortunately, some unscrupulous promoters abuse our freedom to choose by concocting investment schemes that have zero possibility of making money for anyone other than themselves. Such persons promise investment rewards they cannot possibly deliver and have no intention of delivering."

IDFPR: “Unfortunately, some unscrupulous promoters abuse our freedom to choose by concocting investment schemes that have zero possibility of making money for anyone other than themselves. Such persons promise investment rewards they cannot possibly deliver and have no intention of delivering.”

A lifetime of savings – gone! What would you do if your elderly parent told you their investments and retirement money were wiped out in a Ponzi scheme? Clients of former New Jersey investment broker, Maxwell B. Smith III, likely received a phone call from a parent or friend who fell victim to fraud. The article published in the Financial Advisor publication states that, “Smith operated a Ponzi scheme for 17 years, victimizing a dozen elderly clients through several bank accounts he controlled…[i]

“ I handled a case like this a few years ago.  These types of cases are very depressing for everyone involved.” Attorney Michael V. Favia

Smith’s pitch to clients was an investment in health-care facilities. The money wasn’t invested as promised, rather it was spent on Smith’s personal expenses, “…including yearly trips to Gordes, France, for several weeks each summer, according to the attorney general…” the Financial Advisor article states. Smith was sentenced this June to seven years in federal prison after he pled guilty to charges of mail fraud, a common charge in cases like this.

The New Jersey Bureau of Securities also stepped in and pulled Smith’s license to work in the securities industry in New Jersey, for life.  

Could or should the victims have suspected fraud? It is tough to know whether the person you trust with your investments is going to swindle you. Many finance professionals hang their own shingle later in their career and their appearance and marketing materials often look like what anyone might expect from someone like the defendant in this case. In most financial fraud cases, the investors receive periodic payments, on time, as the fraudulent investor uses new investor money to pay dividends to existing clients, and nobody raises an eyebrow until it is too late and the money is gone.

Like New Jersey, Illinois state agencies investigate suggestions of fraud on a regular basis. The Illinois Department of Financial and Professional Regulations (“IDFPR”) offers tips on investment swindles on their website.[ii] Learn more about the multi-billion dollar business of investment fraud and how the swindlers approach their victims. Read about the techniques used and what should be a red flag that things are too good to be true. You might feel safer investing with well-known investment company but be advised; even a large firm can have bad actors within.

If you suspect fraud, the Law Firm of Michael V. Favia can help!

If you suspect an investment professional is up to no good, you can contact the IDFPR for help. If you want more information about how the IDFPR works and what you can do if you suspect fraud, attorney Michael V. Favia practices professional licensing and regulation law. To learn more about how to do some research before hiring an independent investment advisor please use this website link to contact Michael V. Faiva. For more information on similar matters you can Like the firm’s Facebook page and Follow on Twitter. You may also subscribe to the firm’s monthly newsletter by clicking here.


[ii] Illinois Department of Financial & Professional Regulations: Investment Swindles – How They Work and How to Avoid Them.

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