Terry Dean Bahgat (also known as Tarek Dean Bahgat), of Amherst, New York, the managing member of WealthCFO, WealthCFO Advisors, LLC, and WealthCFO Partners, LLC, and stockbroker formerly employed with Gradient Securities, LLC, is the subject of a Complaint brought by Securities and Exchange Commission alleging Bahgat misappropriated customer funds. Securities and Exchange Commission v. Bahgat, et al., Case No. 1:17-cv-00971 (W.D.N.Y. Sept. 28, 2017).
According to the Complaint, an estimated $378,000.00 had been misappropriated by Bahgat from the clients of his advisory business. The SEC alleged that Client A was a retired seventy-seven-year-old physician who knew Bahgat socially and through Bahgat’s advisory practice. Client A’s son, Client B, was also an investment advisory customer. The AWC stated that Bahgat was the manager of Client A’s account at Broker A and Client B’s account at Broker B.
The Complaint stated that on September 9, 2015, Bahgat impersonated Client A when contacting Broker A, where he set up payments to be made to WealthCFO from Client A’s accounts. The Complaint alleged that on December 23, 2015, Bahgat then effected an unauthorized $8,958.46 payment to WealthCFO from Client A’s brokerage account. Client B’s account was purportedly accessed by Bahgat fifteen times from December 2014 to August 2016, which enabled Bahgat to execute a total of $104,150.00 in unauthorized transfers from Client B’s brokerage account to an account at WealthCFO. SEC alleged that the fiduciary duties to Client A and Client B were violated because of Bahgat’s misappropriation of their funds and failure to apprise the clients about his activities.
The Complaint stated that a fifty-seven-year-old friend of Bahgat, Client C, also maintained accounts at Broker B which Bahgat managed. Bahgat purportedly utilized Client C’s logon credentials to access Client C’s accounts held at Broker B, and transferred $169,703.51 from Client C’s brokerage account to WealthCFO without procuring Client C’s approval. Supposedly, in November of 2016, Client C was informed by Bahgat that Bahgat took Client C’s funds because of Bahgat’s financial struggles. The Complaint alleged that Bahgat made a promise to Client C that the funds would be repaid; however, the funds were not paid back to Client C since that point. SEC alleged that Bahgat breached his fiduciary obligations by misappropriating Client C’s assets, concealing his activities in the process.
The Complaint alleged that Client D was another victim to Bahgat’s misappropriation scheme, where $40,000.00 of Client D’s funds were taken by Bahgat after informing Client D that the funds would be invested. Apparently, Bahgat’s personal debts and business expenses were paid down with Client D’s funds without Client D’s permission. In 2016, Bahgat reportedly provided Client D with a document claiming that Client D’s monies were invested in a Harbortoch Note Receivable paying 8.25 percent, valued at $42,000.00. SEC alleged that the Note never existed, and Client D was never repaid any of the $40,000.00. According to the Complaint, $24,000.00 was also misappropriated by Bahgat from Client E; and $3,800.00 from Client F and her husband, Client G. SEC alleged that fiduciary duties to those customers were breached.
SEC alleged that Bahgat’s fraudulent scheme was violative of Investment Advisers Act Sections 206(1) and 206(2). Additionally, SEC alleged that Bahgat’s activities were made possible with the assistance of WealthCFO employee, Lauramarie Colangelo, who Bahgat supervised between 2012 and 2016. Therefore, SEC alleged that Colangelo aided and abetted Bahgat’s Section 206(1) and 206(2) violations. SEC seeks civil penalties, permanent injunctions against Colangelo and Bahgat, and disgorgement of WealthCFO’s alleged ill-gotten gains.
Bahgat has also been barred from associating with any Financial Industry Regulatory Authority (FINRA) member in any capacity based upon allegations that he failed to provide FINRA with information regarding his business activities. Letter No. 2016051730001 (Mar. 22, 2017).
Furthermore, Bahgat has been identified in three customer initiated investment related disputes pertaining to allegations of his improper conduct while employed with Gradient Securities, LLC, Wachovia Securities Financial Network, LLC, and Securities America, Inc. Specifically, on May 25, 2002, a customer initiated investment related written complaint involving Bahgat’s conduct was settled for $9,215.24 in damages based upon allegations that mutual funds purchases effected in the customer’s account were not suitable, causing the customer to incur investment losses.
Then, on August 4, 2003, a resident of New York filed an investment related written complaint involving Bahgat’s conduct, alleging that a variable life insurance policy was purchased that failed to confirm with the terms that Bahgat proposed. Apparently, the customer was placed into a variable universal life insurance policy with a $328,000.00 face value, requiring $20,000.00 in annual premium payments, when the customer was supposed to have been placed into a policy with a $600,000.00 face value requiring $11,000.00 in annual premium payments. Moreover, on November 21, 2016, a customer filed an investment related written complaint regarding Bahgat’s activities, alleging misrepresentation in reference to the customer’ 2016 variable annuity purchase.
Bahgat’s registration with Gradient Securities, LLC was terminated on October 18, 2016.
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