A financial consultant said to be have been based in Red Bank was fined $2 million after he defrauded investors and spent $100,000 of their funds on online gambling, football tickets, casino hotel rooms, dining, shopping and travel, law enforcement authorities announced Friday.
Evan Korchav, of Jersey City, and his firm, White Cedar Group, were also barred by the state Bureau of Securities from doing finance-related business in New Jersey acting state Attorney General John Hoffman said.
From the announcement:
“The Bureau of Securities found that Kochav developed an elaborate fraud that may have appeared perfectly legitimate to the investors he deceived,” Acting Attorney General John J. Hoffman said. “This action will bar Kochav from ever again selling securities in New Jersey.”
Kochav founded White Cedar Group in or about June 2013, the same month he was terminated by an Illinois-based broker-dealer firm for violating its internal policies. White Cedar purports to be an economic consulting firm that has partnerships and relationships with a variety of investment groups and trusted business partners throughout the world and in various industries, including real estate, manufacturing building development, oil drilling and mineral rights.
Between at least June 2013 and February 2014, Kochav and White Cedar Group induced investors to invest in the company and to pay for investment advice.
“According to the Bureau’s findings, Kochav misused investor funds by entertaining himself at casinos in Costa Rica, Florida, and New Jersey, on gambling websites, and in other ways. Kochav even encouraged investors to liquidate their genuine investments, in order to pay more money that funded Kochav’s personal expenses,” Division of Consumer Affairs Acting Director Steve Lee said.
“Kochav’s and White Cedar Group’s use of fictitious account statements, quarterly reports and trade confirmations made it very difficult for investors to learn they were being victimized,” Bureau of Securities Chief Laura H. Posner said. “Had these investors checked with the Bureau, they would have learned that Kochav was not registered to sell securities in White Cedar Group and that, in August of 2013, the Financial Industry Regulatory Authority (FINRA) had barred Kochav from associating with any FINRA member.”
As set forth in the Summary Revocation and Penalty Order, Bureau Chief Posner found that:
Kochav and White Cedar Group violated New Jersey’s Uniform Securities Law through the following activities, among others:
The misuse of investor funds by withdrawing money through debt transactions and/or ATMs located at or near casinos on Costa Rica, Florida, New Jersey, and Pennsylvania, and for at least two poker websites.
The misuse of investor funds to pay for personal expenses including shopping, dining, air travel, hotels at casinos and other locations, football tickets, and other entertainment.
The misuse of investor funds by transferring $33,375 to Kochav’s wife, making cash withdrawals, and paying other investors.
Providing investors with false and misleading account documentation.
Kochav and White Cedar Group raised at least $101,802.73 from the “sale” of interests in White Cedar, even though these securities were not registered with the Bureau.
Kochav also fraudulently provided investment advice to at least three of the White Cedar Group investors for compensation. Among other things, he recommended that they liquidate existing investments and use cash advances from their credit cards to generate returns through other investments, including investments in White Cedar Group.
In order to further and conceal their fraud, Kochav and White Cedar Group provided investors with, among other things:
Fabricated account statements with fictitious beginning and ending account values, dividends and interest;
Fabricated trade confirmations that falsely described the details of purported trades, including made-up order numbers;
Fraudulent asset allocation pie charts, showing fictitious percentage allocations of various holding types such as equities, options, or private placements; and
Fraudulent White Cedar Group quarterly statements that purported to show holdings in, among other companies, Tesla Motors, Google, and Apple, with a total value of more than $13 million.
In addition, Kochav provided at least one investor with copies of 11 checks totaling $127,747.83 that purportedly were issued from a White Cedar Group account to a separate clearing company to execute trades on an investor’s behalf. In truth, the checks had never been sent to the clearing company, and White Cedar Group did not have an account with that clearing company.
In the Summary Revocation and Penalty Order, Bureau of Securities Chief Posner revoked Kochav’s agent registration and ordered him and White Cedar Group to pay a $2 million civil penalty.
Kochav and White Cedar Group may request a hearing within 15 days of receiving the Summary Revocation and Penalty Order, by filing a written answer and request for a hearing.
The Bureau of Security’s investigation was conducted by Investigators Peter Cole and Isaac Reyes.
According to one online directory, the firm was located at 125 Half Mile Road in Lincroft. The bureau did not release the firm’s exact location in its announcement, and a call for clarification was not immediately returned.