Brenda Smith, Securities Fraud, New Jersey 2024

Brenda Smith, a 61-year-old Philadelphia investment fund manager, was sentenced to 109 months in prison for orchestrating a $100 million securities fraud scheme, U.S. Attorney Philip R. Sellinger announced.

Smith, who managed and controlled Broad Reach Capital LP, a pooled investment fund/hedge fund established in February 2016, was previously pleaded guilty by videoconference before U.S. District Judge Madeline Cox Arleo to Count Seven of an indictment charging her with securities fraud.

According to documents filed in this case and statements made in court, Smith made misrepresentations to investors and promised that she would invest their funds in particular trading strategies that Broad Reach Capital was allegedly optimally situated to execute. Smith referred to these strategies as dividend capture, VIX Convergence, and opportunistic trading.

Smith misrepresented the success and performance of Broad Reach Capital to investors and prospective investors, touting it as a trade-focused investment fund that was highly liquid and employed a robust risk management program. She distributed written materials about Broad Reach Capital to investors and prospective investors that included purported historical performance information, such as claimed annual returns of over 33 percent in 2017 and positive monthly returns in 2018.

Over the course of the scheme, Smith collected more than $100 million of cash into Broad Reach Capital from approximately 40 investors. At its peak, however, the value of cash and securities in the Broad Reach Capital bank and brokerage accounts did not exceed approximately $32 million. Instead of investing the money as she promised, Smith transferred tens of millions of dollars out of Broad Reach Capital to entities she controlled for purposes inconsistent with the trading strategies, including more than approximately $10 million for mineral mining operations and approximately $2 million for American Express credit card bills.

In addition to the prison term, Judge Arleo sentenced Smith to three years of supervised release and ordered her to pay $47.2 million in restitution.

The U.S. Attorney’s Office credited special agents of the FBI Philadelphia Division and special agents of the U.S. Attorney’s Office for their investigation leading to Smith’s sentencing. The U.S. Securities and Exchange Commission’s Philadelphia Regional Office also assisted in the investigation.

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