Former financial adviser Jinesh “Hodge” Brahmbhatt has been banned by the Financial Industry Regulatory Authority in relation to his participation in an alleged $18 million fraud that ensnared a number of prominent NFL and NBA players, Yahoo Sports has learned.
Brahmbhatt signed a letter of Acceptance, Waiver and Consent with the Financial Industry Regulatory Authority on Nov. 4 after failing to appear and testify at an August disciplinary proceeding aimed at getting to the bottom of the alleged fraud.
Brahmbhatt's attorney Alan Futerfas of The Law Offices of Alan S. Futerfas emphasized that Brahmbhatt was banned by FINRA for failing to appear at the August disciplinary proceeding and cautioned against reading any further into that outcome.
"The FINRA Consent makes clear that the reason for the bar is that Mr. Brahmbhatt 'failed to appear and testify at the disciplinary hearing' of Success Trade. FINRA did not lodge any charges against Mr. Brahmhatt in relation to the Success Trade offering. Any suggestion or implication to the contrary is unfounded."
Yahoo Sports previously reported that multiple federal agencies — including the U.S. Department of Justice, the FBI and the U.S. Securities and Exchange Commission — were probing investments the financial adviser, who was once registered by the NFL Players Association, helped sell to NFL and NBA players.
During a 25-month investigation, Yahoo Sports identified multiple athletes who purchased promissory notes from Success Trade. Among them were Detroit Pistons guard Brandon Knight, Cleveland Browns cornerback Joe Haden, San Francisco 49ers tight end Vernon Davis, former Washington Redskins running back Clinton Portis and former Chicago Bears defensive end Adewale Ogunleye.
Brahmbhatt and his employees at Virginia-based Jade Private Wealth Management previously managed finances for upwards of 70 professional athletes.
In April, the firm Brahmbhatt was registered with — Success Trade — was ordered to halt fundraising after allegedly selling $18 million in fraudulent and unregistered promissory notes to 58 persons, many of whom were professional athletes.
Brahmbhatt told Yahoo Sports in April that he had more than 30 clients who had purchased around $12 million worth of the fraudulent notes from Success Trade. Sources said those investments ranged anywhere from $50,000 to more than $500,000 and the investments purportedly generated interest returns between 11 and 26 percent.
In a complaint filed by FINRA and obtained by Yahoo Sports, regulators alleged that multiple athletes involved with Success Trade were introduced to the fraudulent notes by representatives of Jade Management. Success Trade is alleged to have made at least $1.25 million in payments to Jade Management since March 2009.
As of April’s release by FINRA, Brahmbhatt was registered in the financial advisers program established by the NFL Players Association. The union sent out an alert to agents in May stating they had suspended his registration. Union spokesman George Atallah hasn't responded to multiple emails, phone calls or text messages requesting comment on Brahmbhatt’s involvement in their program.
In late April, Brahmbhatt sent an email to some of his clients indicating he was unsure whether they will get their money back.
"We have told [Success Trade CEO Fuad Ahmed] that what is most important is getting you paid back," Brahmbhatt said in his email to athletes. "We believe that this is what he is trying to do. It is not clear whether he will be able to accomplish this, given the FINRA action and a number of other hurdles."
At the time Brahmbhatt said that while a number of his clients were involved with Success Trade deals, he maintained his company did not improperly benefit from those deals.
"I just hope nobody says, 'The guys at Jade capitalized on this,' " Brahmbhatt said. "Because we never did. Other than the first year we took [$1.25 million] from him … everything we did for him is because we actually liked it."
Brahmbhatt contended he had no reason to believe Success Trade was acting improperly while drawing investor money, but added that he didn't have full knowledge of the company's financial practices.
"We don't have [Success Trade's] books," he said. "People say, 'Man, you're stupid. You should have looked at [Success Trade's] last two or three years of income statements.' But you know what? We didn't. You know why we didn't? Because he never missed a damn payment, and we never really thought about it.
"Since I've been in this business everyone said to me that [Jade Management was] running some kind of a pyramid scheme or a Ponzi scheme but I fought it tooth and [expletive] nail. I was like, 'Nope.' I thought people were just hating on us because … we were doing so well. … I'm [expletive] devastated, man. It's everything I worked for my whole life.”
At the time, Brahmbhatt said he still didn’t know whether Success Trade was operating a Ponzi scheme with investor money.
“I would argue that, how would we know?” Brahmbhatt said. “We were operating on belief based on what we were told by Fuad [Ahmed]. … My take is I wouldn’t know if it was a Ponzi scheme. I mean, if you look at all of the allegations, that’s what it looks like, but we wouldn’t know. We wouldn’t sit there and blatantly put all of our clients in a scheme.”
Among the nearly $800,000 in personal expenditures Success Trade’s founder used investor funds for, he paid $1,300 a month to lease a Range Rover, paid $82,000 to his brother through undocumented, interest-free loans, and used the money to pay off his personal credit cards and for clothing.
FINRA also alleged at the time that Ahmed and Success Trade began taking money from new investors so it could continue to pay the principal owed to previous investors.
Success Trade funded Jade Management’s business from approximately March 2009 through March 2010. The beginning of that financial relationship coincides with FINRA’s claim that Success Trade had not been generating sufficient revenue to pay its expenses, including principal and interest owed on Success Trade investments. Success Trade has relied primarily on capital raised from the sale of Success Trade investments to keep the company solvent.