Investor paid for lawyers, BMW with stolen $450,000, SEC says
Officially, Miami’s David Coggins doesn’t admit to the investor fraud the Securities and Exchange Commission alleged in a complaint, including using investor money to pay his divorce lawyers and a
BMW car payment.
But the consent agreement filed in Miami federal court between the SEC, Coggins, Coggins-owned Coral Gables Asset Management and related companies says they’ll “pay disgorgement of ill-gotten gains” with interest as well as a civil penalty to be determined.
The SEC says of the money Coggins raised from investors, he moved at least $1.6 million into accounts for Coral Gables Asset Holdings, which “has no legitimate claim to these funds.” Coggins is accused of “misappropriating” $456,000 for his personal use.
Coggins and his companies “have returned approximately $593,000 of funds to investors,” the SEC complaint said. “However, their losing trading strategy coupled with their substantial misappropriation has resulted in a near total loss of the remaining investor funds.”
Another part of the judgment bars Coggins from “association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization.”
Coggins hasn’t been charged criminally.
State of Florida records say Coggins formed Coral Gables Asset Management (CGAM) with Jawad Addoum and Alok Kumar in 2014. The SEC complaint says they formed Coral Gables Asset Holding (called “The Fund” in court documents) in 2015.
They “developed and marketed a trading strategy for the Fund that used computers to analyze public company filings and other documents to generate trading signals,” the complaint says.
Addoum and Kumar dropped out in 2016, leaving Coggins in control of CGAM and The Fund. Coggins would make CGAM the “investment manager” for The Fund.
When Coggins’ partners departed, $300,000 had been raised from three investors in The Fund. From then until this February, Coggins would raise another $1.55 million from seven investors, the SEC alleges.
But the SEC said Coggins created a world of falsehoods to seduce that cash from investors, then acted as if the money belonged to him.
MISAPPROPRIATED FUNDS
One of several examples in the complaint says in October 2018 Coggins told an investor in The Fund to wire the $100,000 into CGAM’s account. That account happened to be $1,180 in the red.
Coggins, the SEC said, didn’t move that money to The Fund’s account, but he did move it.
“Rather, Coggins wired $15,000 to his divorce lawyers, withdrew $3,700 in cash, and made a car payment on his BMW,” the complaint said. “Over the next thirty days, Coggins used over $14,000 of Investor No. 1‘s money for expensive restaurants, air travel, hotels, and shopping. By the end of November 2018, only $58,683 of Investor No. 1’s money remained in the account.”
PERFORMANCE MYTHS
The complaint said Coggins emailed a monthly newsletter-type update on The Fund’s performance to investors and potential investors that included a link to a “Performance Sheet.”
In those sheets, the SEC claims, Coggins didn’t properly acknowledge The Fund’s shrinkage.
“The (Dec. 31, 2019) Performance Sheet, consistent with the other Performance Sheets, contained a table purporting to display The Fund’s performance,” the complaint said. “However, the table vastly overstated the
Fund’s actual performance. For example, the table showed 37 months of positive monthly performance from November 2016 through November 2019, while, in reality, in approximately 26 months during that time frame, The Fund had negative performance.”
In 2017, Coggins emailed one investor three times in five months about The Fund’s winning streak: “Coral Gables Gables Asset Holdings L.P. extends ‘perfect 2017’ through September, completing its 11th consecutive month of positive returns.”
Actually, the complaint said, The Fund had lost money six of those 11 months.
The complaint said in a presentation to a potential investor in 2018, Coggins was stated to have more than 15 years in portfolio management, including overseeing $500 million in accounts at a private bank. His resume also included time with a big broker and a big, well-known bank as a trader, equity analyst and portfolio manager.
“These statements were false and misleading,” the complaint said.
The SEC said his work at a private bank didn’t include overseeing accounts. He was a loan officer at the large bank. He worked at the brokerage firm for eight months, but hadn’t worked in securities since leaving that firm in May 2002.
The SEC says Coggins faked audits from three firms with a sloppiness of a teenager hurriedly doctoring a report card.
Three alleged audits of the fiscal year ending 2018 contained different figures, even on something as basic as The Fund’s assets: $52,904,796 by one false audit and $1,960,045 by another faux audit. (Actual answer: $89,701).
“Coggins fabricated the audit reports that purport to be from Audit Firm 1, since the firm does not appear to exist,” the complaint said, noting the firm’s phone number rings to a different number, one registered to Coggins and the address hasn’t had a tenant since 2003.
The second audit firm has never done an audit of The Fund.
“On Oct. 11, 2019, Coggins emailed an accountant at Audit Firm 3 seeking an audit report for the Fund,” the complaint says. “Coggins attached a draft of an already completed false report and wrote: ‘I need you to put your company logo on it and sign off on it that’s it.’
“In response, the accountant wrote: ‘You have to find some other sucker!! I don’t do this crooked work at all!!!’ “
THE SEC SAID COGGINS CREATED A WORLD OF FALSEHOODS TO SEDUCE CASH FROM INVESTORS, THEN ACTED AS IF THE MONEY BELONGED TO HIM.