What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: October 14, 2019

LPL terminated financial advisor Dain F. Stokes on August 28, 2019 for selling unregistered promissory notes to clients that purported to invest in a project in Africa allegedly sponsored by Taylor Swift. According to InvestmentNews, Stokes converted at least $576,000 from two clients, whom he solicited to invest in this phony charity project, which he sold as being created by Swift to help needy people in Africa. Stokes claimed to have a close relationship with Swift, telling clients that she personally hired him to manage the finances of the Africa project and to promote a new song release by her in June 2019. He also told clients that Bill Gates was involved in the project.

The State of New Hampshire Department of State Bureau of Securities Regulation filed a petition and order against Stokes after an investor (“Investor #1”) invested $201,000 in the Africa Project between August 1, 2018 and January 25, 2019. Stokes used promissory notes to facilitate these investments. According to the promissory notes, Investor #1 would receive the return of his entire principal plus 20% interest by making this investment. Payment on the first promissory note was initially due by November 8, 2018, however the due date was continually pushed back by Stokes. At one point, he even told his client that President Donald Trump allegedly froze his assets. Stokes was ordered to pay $201,000 plus interest in restitution to Investor #1 and a $20,000 fine for violating New Hampshire Blue Sky Laws, which prohibit the fraudulent sale of securities (RSA 421-B:5-501) and the sale of unregistered securities (RSA 421-B:3-301(a)). To date, a second investor who invested $375,000 has come forward.  The New Hampshire Department of State Bureau of Securities Regulation has since frozen Stokes’ assets and issued an injunction prohibiting him from speaking with those who invested in this scam.

New Hampshire authorities interviewed Stokes, who refused to provide any details about the African charity, claiming that all information, including the name, was privileged. He also refused to reveal whether the checks, which were made payable to him personally, were invested in his personal accounts.

Promissory notes are considered securities and are a common vehicle used by brokers to sell fraudulent investments and convert client assets. LPL will likely argue that they are not responsible for clients’ losses in this investment because Stokes engaged in “selling away” but that is far from the truth. Brokerage firms, like LPL Financial, are required to supervise their financial advisors and client accounts. Stokes worked from two LPL branch offices in New Hampshire, including from his home Fremont, New Hampshire. Permitting advisors to work from home opens the door to selling away and theft. Part of LPL’s supervisory responsibilities include performing announced and unannounced audits of Stokes’ branch offices, which are necessary to adequately supervise for and prevent securities law violations. For example, audits could have revealed checks made payable to Stokes from LPL customers, correspondence about the Africa charity, and copies of the promissory notes.   According to the New Hampshire complaint, Stokes openly communicated via text messages with clients about the Africa project. These are all red flags that, had LPL discovered them, could have stopped Stokes dead in his tracks before he stole nearly $600,000 from clients.

Dain Stokes has been registered with LPL Financial since June 2009 and was previously registered with Edward Jones starting in 2000. There are three customer complaints disclosed on his BrokerCheck Report, however none of the complaints appear to be for losses in the Africa scam.

Stoltmann Law Offices is currently investigating Stokes’ scheme and LPL’s liability. We have represented hundreds of investors in similar theft and Ponzi scheme cases in FINRA arbitration, which is where customers of Stokes and LPL would be required to file their cases, and have helped them recover millions of dollars from brokerage firms. If you invested any money with Dain Stokes, contact our office immediately at 312-332-4200 for a free evaluation. We work on a contingency fee basis, so we don’t get paid until you do.


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