Local Charged With Defrauding Seniors
The Securities and Exchange Commission has charged a former Florida broker, who now lives in Far Rockaway, with defrauding senior citizens and other customers, many of them involved with the Orthodox Jewish community, through a variety of abusive sales practices, earning him more than $700,000 in commissions and fees while causing his clients to tank to the tune of more than $2.7 million.
The complaint, filed on September 22 in the United States District Court for the Southern District of Florida, alleges that Gary Gross, 56, "defrauded several of his customers by making material misrepresentations and omissions about the risks and suitability of securities he bought for them, churning customer accounts and fabricating customer account values. Many of Gross' victims were elderly Jewish investors who trusted Gross based on his statements that he was involved in the Jewish community and their perceived personal relationships with him."
An article in the Miami Herald, penned by investigative reporter Dan Christensen, said that Gross used religion as a way of getting the seniors to turn their life savings over to him and the company for which he then worked, Axiom Capital.
Christensen told The Wave this week that Gross was a "very religious guy, who used his religion to get new customers. With a prayer shawl draped over his shoulders, stockbroker Gary J. Gross cradled the Torah at the Chabad of Boca Raton - praying with worshipers and recruiting them as investors."
"Many of Gross' customers were elderly, unsophisticated investors who wanted only to preserve their principal and grow their portfolio while investing with minimal risk," said the SEC complaint. "Instead of helping people pursue their goals, he defrauded them."
One of Gross' alleged victims was the congregation's rabbi, another an elderly Holocaust survivor who met Gross at a Jewish scholarship dinner.
To cover up what he was doing, the SEC says, Gross doctored account records to make clients think that they had more than they actually did.
The Miami Herald reported last week that the Federal Bureau of Investigation (FBI) is investigating the case and that Gross has filed for bankruptcy after a number of his ex-clients won court judgments against him.
In one case, Henry and Rosalind Drabin reached a confidential resolution with Gross through arbitration that reportedly restored the couple's account along with $417,000 in compensatory damages and attorney's fees.
Attorney Scott Silver, who represents a number of Gross's alleged victims, said that his clients had been devastated by the broker and his actions.
"You're talking about people in their 60s and 70s and 80s who trusted him and had their life savings taken away," Silver said. "You're talking about their ability to get better health care, to take vacations, all the things that people do in their retirement."
The SEC complaint says that Gross recommended mutual and closed-end funds to his customers that were unsuitable for them and purchased risky, illiquid private placements in public equities for his customers without telling them of the risk factors involved.
It alleges that he "churned" accounts, buying and selling without reason other than building up his commissions on each sale.
For example, the SEC says that one of Gross' customers was a 60-year-old retiree. In March and April of 2005, the complaint alleges, Gross invested more than half of her portfolio in a penny stock, telling her that provided good income and there was little risk. In just six weeks, Gross purchased $575,000 of the penny stock for the retiree. He liquidated the entire position 33 days later. The retiree lost $13,500 and Gross earned $15,000 in commissions from the transactions.
In another case, the SEC says, between March and September of 2006, Gross made 131 transactions in one account, held by a 74-year-old man. Gross never advised the customer of these trades and failed to disclose that he used a margin account to effect the transactions. The account had a margin debit as high as $277,000 and the customer ultimately lost $350,000.
Gross, a Hofstra University business graduate, obtained his broker's license in 1993.
The SEC complaint seeks a permanent injunction against Gross that would keep him from acting as a broker and attempt to get him to return "the ill-gotten gains" he allegedly took illegally from his customers, along with a hefty fine.
"We're happy to see the SEC beginning to hold people responsible for the public's losses," Silver said.
Attempts to reach Gross for comment were unsuccessful.