Former Financial Advisor Sentenced to Prison for $2.5 Million Investment Fraud Scheme

Posted on January 28th, 2025 at 9:00 AM
Former Financial Advisor Sentenced to Prison for $2.5 Million Investment Fraud Scheme

From the desk of Jim Eccleston at Eccleston Law

According to InvestmentNews, a former financial advisor from Wisconsin, David Braeger, has been sentenced to 24 months in federal prison for an investment fraud scheme that caused over $2.5 million in losses.

Braeger, 57, of Fox Point, Wisconsin, was a registered broker from 1992 to 2014, working at 15 different firms during his career. Notably, three of his last four firms-Newport Coast Securities Inc., Accelerated Capital Group, and Midtown Partners—were later expelled from the securities industry. In 2016, the Financial Industry Regulatory Authority (FINRA) barred Braeger after allegations surfaced that he misused and converted $30,000 in customer funds and failed to follow client instructions.

Following his industry bar, Braeger initiated a fraudulent investment scheme. In 2017, he founded the Blue Star Automotive Fund, persuading 27 investors to contribute more than $5.4 million by purchasing limited partnership shares. Braeger claimed the funds would primarily support an automobile dealership. While approximately half of the funds went toward the dealership, Braeger misappropriated more than $2.5 million for personal expenses.

Braeger used investor money to buy luxury vehicles, pay legal fees, and acquire personal assets, including the Silver Spring House Restaurant in Glendale. According to InvestmentNews, he also sponsored a NASCAR driver and purchased cryptocurrency with the misappropriated funds.

In addition to the Blue Star scheme, Braeger orchestrated another fraud involving $100,000 from an investor for a venture called IEF. He falsely claimed the funds would finance litigation related to a Ugandan energy company but diverted most of the money for personal use.

InvestmentNews also reports that Braeger is one of two former Wisconsin advisors to face prison time for investment fraud this year. Earlier, Madison-based advisor Thomas Demergian, 63, was sentenced to four and a half years in federal prison for defrauding retiree clients of over $1.8 million in a scheme spanning more than two decades. Demergian pleaded guilty to wire fraud and tax evasion charges and has been ordered to pay restitution.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

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