SEC: ‘Guru’ Bilked Faithful, Chabad Goers

BOCA RATON, FL — A self-styled investment guru accused of recruiting clients from a synagogue where he worshiped was charged with using ”abusive sales practices” to cheat them of hundreds of thousands of dollars, according to the U.S. Securities and Exchange Commission.

The 17-page enforcement action accuses Gary J. Gross, 56, of churning clients’ accounts with unauthorized and unsuitable trades, reaping $700,000 in the scheme, including buying risky penny stocks and other investments, the SEC said.

To cover up what he was doing, Gross doctored account records to make clients think they had more than they actually did, the agency said.

‘Many of Gross’ customers often 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 these people pursue their goals, Gross defrauded them.”

‘HALLELUJAH’

Former clients said they waited for years for regulators to act.

”Hallelujah,” said Joan Ezersky, 76, who said she thought her life was over the day she learned her $500,000 investment with Gross had shrunk to $468. ”What took ’em so long?”

”We’re happy to see the SEC beginning to hold people responsible for the public’s losses,” said Scott Silver, a Coral Springs lawyer who represents Ezersky and other former clients of Gross.

The SEC said Gross caused more than $2.7 million in investor losses, but did not say how many of his clients at Boca Raton’s Axiom Capital Management were victims.

Gross worked at Axiom for five years until complaints against him piled up last year.

A review of hundreds of records by The Miami Herald earlier this year show the losses attributable to Gross, who now lives in Far Rockaway, N.Y., appear much larger than the SEC’s total.

The newspaper reported in February that over the past decade, Gross’ ex-clients have filed lawsuits and arbitration cases alleging losses of nearly $20 million. The FBI is now investigating.

EX-CLIENTS

Gross, who recruited many of his clients from the Chabad of Boca Raton where he once belonged, filed for Chapter 7 bankruptcy last year.

Nearly 100 of Gross’ ex-clients at Axiom, including Happy Days actor Henry Winkler, filed claims as creditors. Other alleged victims included a rabbi and an 81-year-old Holocaust survivor.

The SEC is seeking a permanent injunction against Gross. The agency also wants Gross fined and ordered to disgorge his “ill-gotten gains.”

Gross could not be reached for a comment. Previously, he denied any wrongdoing, saying his clients were upset they lost money.

MANY COMPLAINTS

Though investors filed complaints with the state Office of Financial Regulation, state agents never revoked Gross’ license, despite a lengthy investigation and settlements with victims exceeding $1 million.

Instead, state regulators placed him on heightened supervision — a form of probation — in 2003, allowing him to stay in the business.

Though complaints continued, state regulators never followed up to make sure Gross was abiding by the terms of his license, records show.

To this day, Gross has one of the longest records of complaints in the industry.

A Miami Herald analysis of nearly 600,000 stockbrokers across the country found that Gross had more complaints against him as of January 2007 than 99 percent of all brokers. Since then, his complaint count has doubled.