E. Herbert H. Hafen (also known as Elias Herbert Hafen and as Elias Herbert Niggebrugge) of New York New York a stockbroker formerly registered with Wells Fargo Clearing Services LLC has been barred from being a stockbroker or an investment adviser representative according to a Securities and Exchange Commission (SEC) Order based on findings of Hafen having pled guilty to investment adviser fraud. In the Matter of E. Herbert Hafen Administrative Proceeding File No. 3-19721 (Mar. 4, 2020).
The SEC Order noted that Hafen pleaded guilty to investment advisor fraud in violation of 15 USC Sections 80b-6 and 80b-17. United States v. E. Herbert Hafen Criminal Action No. cr-00637 (Sept. 4, 2019). In the criminal proceedings, Hafen was alleged to have schemed to defraud customers through making them believe that he was able to get his hands on investment opportunities that were not available through financial institutions. Customers who expected to receive six percent returns later found that their money had been utilized by Hafen for his own personal purposes. SEC determined Hafen a threat to the investor public given his investment advisor fraud record.
The SEC Complaint against Hafen accused him of engaging in fraudulent activities violative of Securities Exchange Act of 1934 Section 10(b), SEC Rule 10b-5 and Investment Advisers Act Sections 206(1) and 206(2) founded on accusations of Hafen’s fraudulent scheme and misappropriation of customer funds. Case No. 1:19-cv-08234 (Sept. 4, 2019). The Complaint alleged that customers’ funds were transferred to Hafen’s bank account where he stole it. The stockbroker failed to repay a portion of the $1,600,000.00 he procured from his eleven victims. On March 6, 2020, Hafen was permanently enjoined from committing future violations of federal securities antifraud laws.
Hafen has also been issued an Order to Cease and Desist and Notice of Intent to Fine by the State of Connecticut’s Banking Commissioner supported by allegations of his unethical and dishonest business practices including his misuse of customer funds. Case No. CDF-20-8474-S (Feb. 11, 2020).
According to the Order, between 2011 and 2018, an elderly customer’s funds were obtained by Hafen based on his representations about an outside investment opportunity. The customer’s funds were allegedly never used for investments but rather used for paying other investors who invested through Hafen as well as paying the stockbroker’s mortgage and credit card bills. The customer was supposedly told that her account balance was $300,000.00 at a time when it was only worth $150,000.00.
Hafen has also been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon findings that he failed to provide information to the regulator about his activities. Case No. 2018059821901 (Feb. 1, 2019). Hafen was suspended in 2018 but neglected to correspond with FINRA to resolve it by the January 31, 2019 deadline.
FINRA Public Disclosure reveals that Hafen has been identified in three customer initiated investment related disputes containing allegations of his misconduct while employed by securities broker dealers including Morgan Stanley Smith Barney and Wells Fargo Advisors. On May 9, 2019, a customer initiated investment related arbitration claim involving Hafen’s conduct was settled for $675,000.00 in damages based upon allegations that the customer’s funds had been misappropriated by the stockbroker between July of 2011 and January of 2018.
Hafen has also been identified in a customer initiated investment related written complaint on February 11, 2020 where the customer sought $50,000.00 in damages founded on accusations of Hafen’s misuse of the Morgan Stanley Smith Barney customer’s funds between April of 2008 and March of 2018. On March 9, 2020, another customer initiated investment related arbitration claim concerning Hafen’s activities was resolved for $120,000.00 in damages founded on accusations that the customer was led to believe from Hafen that assets she invested would be placed into high yield investments. The customer was allegedly defrauded by Hafen while he was employed by Wells Fargo Advisors.
Hafen was discharged by Wells Fargo Clearing Services on August 21, 2018 supported by allegations of the stockbroker entering into financial transactions with customers away from Wells Fargo and without its permission.