Wealth Enhancement Group Lawsuit update
According to Barron’s on January 2nd, 2025, former investment advisor Julie Darrah has been ordered to pay a $7 million settlement to Wealth Enhancement Group after reportedly being found guilty of stealing over $2 million from clients, primarily elderly individuals. This settlement follows federal court rulings against Darrah in both civil and criminal cases related to her alleged fraudulent activities.
In Ocotber 2023 we reported that Julie Darrah, a Santa Maria-area investment advisor, agreed to a $2.25 million civil fraud settlement with the U.S. Securities and Exchange Commission (SEC).
The consent judgment, filed in the U.S. District Court for the Central District of California, pertained to allegations that Darrah misappropriated funds from nine elderly female clients she advised between November 2016 and July 2023.
While not admitting guilt, Darrah had reportedly consented to pay any ill-gotten gains, and the final amount, including penalties and interest. Under the agreement, Darrah is permanently barred from selling or offering securities, acting as a trustee, and is not allowed to deduct the penalty from taxes or discharge the debt through bankruptcy.
Darrah and Vivid Financial Management, the wealth management firm she co-founded, were hit with civil charges by the Securities and Exchange Commission (SEC). The charges stem from allegations that they embezzled $2.25 million from at least nine elderly female advisory clients.
Wealth Enhancement Group Lawsuit
This SEC action comes approximately a month after Wealth Enhancement Group, an advisor aggregator that acquired Vivid in 2021, allegedly filed a lawsuit against Darrah, age 50. In their suit, they accuse Darrah of being involved in a theft operation targeting older clients. The SEC’s case aligns with many of the allegations presented in the Wealth Enhancement lawsuit. The SEC’s complaint states that Darrah, beginning in November 2016, and possibly earlier, victimized elderly female clients, many of whom depended on Darrah for their financial well-being. This includes one client living in a memory care facility.
According to the SEC complaint, Darrah reportedly gained control of her victims’ assets by becoming a trustee for her clients’ trusts, allegedly serving as the signatory on their bank accounts, or obtaining power of attorney over their assets and accounts. Over the course of 2016 to 2023, clients incurred losses totaling approximately $2.25 million due to these allegedly fraudulent schemes.
Among the victims were two elderly sisters, a 75-year-old widow from whom Darrah allegedly stole over $1 million, and a 78-year-old widow who lost around $578,000 due to Darrah’s purported deceit, according to the SEC complaint. The younger sister now allegedly has a little over $87,000 remaining in her accounts and relies on monthly Social Security payments of about $1,631. The complaint further notes that she has been allegedly residing in a memory care facility since April 2022, with monthly expenses of $7,845.
Embezzlement Scheme
Darrah’s alleged embezzlement scheme mainly involved liquidating the securities of her clients, with the proceeds being transferred to her personal bank accounts. She reportedly commingled these funds with her own resources, which she purportedly used to acquire and enhance real properties, cover personal expenses, purchase luxury vehicles, and operate restaurant businesses at a loss.
Darrah is facing multiple violations of the Securities Act of 1933 and the Investment Advisers Act of 1940. The complaint seeks disgorgement of allegedly ill-gotten gains, prejudgment interest, monetary penalties, and permanent and conduct-based injunctions.
Additionally, the SEC complaint names a relief defendant, PC&J, a firm in Orcutt, California, of which Darrah owns 33.4%. According to the SEC, Darrah allegedly diverted client funds to the company, which operates two restaurants in Santa Maria and Orcutt. Local reports have indicated that several businesses connected to Darrah and PC&J, including Cups & Crumbs, a coffee shop, and The Homestead, a deli, have suddenly closed.
Asset Freeze
The SEC has also secured a preliminary injunction against Darrah, which includes an asset freeze, an accounting requirement, a ban on document destruction, and expedited discovery.
Darrah allegedly attempted to conceal her fraudulent activities by changing client account mailing addresses to her own address and falsely declaring that she was not acting as the trustee for any clients. Furthermore, she purportedly had a client initial two backdated promissory notes in response to SEC subpoenas.
In the SEC’s complaint, it is noted that Julie Darrah and other owners of Vivid sold the advisory business in 2022 (referring to the Wealth Enhancement deal, without naming the Minnesota firm specifically). She continued her association with the aggregator as a senior vice president until July 2023 when she was placed on administrative leave, and the firm terminated its relationship with her in September, according to reports.
FINRA BrokerCheck Report – Julie Darrah
According to her FINRA BrokerCheck report, Darrah was registered with Mutual Securities in Orcutt, California from June 2013 until January 2022.
She has one disclosure on her record, a termination from Wealth Enhancement stating “The reported individual was terminated during an internal review for fraud, wrongful/unauthorized taking of client property, and for violations of investment-related securities law (including those related to custody of client assets), firm policies and expected industry and professional standards, including failure to cooperate with the firm’s internal review.”
Protecting yourself against Broker Embezzlement
To mitigate the risk of broker embezzlement, financial institutions and investors can implement several preventive measures to avoid these financial devastations. Remember that while these precautions can reduce your risk, no strategy can provide absolute protection against broker embezzlement or financial fraud. Being vigilant, informed, and proactive in managing your investments is key to safeguarding your assets in the financial market.
Conducting thorough background checks and exercising due diligence when hiring brokers or financial advisors gives companies or investors a better understanding of the candidates character and their views on ethical practices. Verifying credentials and employment history is a smart decision as well. Searching their history on sources such as FINRA BrokerCheck is also a useful tool as it provides a more in-depth analysis of a broker’s history. This information can help to determine whether they’re the right choice for your firm as an employee or as a financial advisor.
How to Recover your Investment Losses
FINRA Dispute Resolution is an arbitration venue for investors with claims against their brokerage firm or financial professional. It provides investors with an opportunity to attempt to recoup their investment losses and is an alternative to filing such claims in court.
If you have suffered losses investing with Julie Darrah, the securities attorneys at the White Law Group may be able to help you. For a free consultation with a securities attorney, please call (888) 637-5510.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm dedicated to helping investors in claims in all 50 states against their financial professional or brokerage firm. Since the firm launched in 2010, it has handled over 800 FINRA arbitration cases.
Our firm represents investors in all types of securities related claims, including claims involving stock fraud, broker misrepresentation, churning, unsuitable investments, selling away, and unauthorized trading, among many others.
With over 35 years of securities law experience, The White Law Group has the expertise to help investors to recover their fraud losses.
