Former Dayton area broker ordered to pay $1.1M; faces criminal charges

A U.S. District Court judge has ordered a former Dayton-area financial broker to pay more than $1.1 million in a civil case brought against him by the U.S. Securities and Exchange Commission.

The SEC sued John Gregory Schmidt, 67, of Bellbrook in October for allegedly misappropriating more than $1.6 million from clients — including many elderly clients — for the past 14 years.

In a “final judgment” issued by U.S. District Judge Walter Rice last week, Schmidt was ordered to pay $270,663, money Rice wrote represents “profits gained as a result” of conduct involved in what the SEC charged was a “classic fraudulent scheme.”

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Schmidt was also ordered to pay $864,301 in a civil penalty to the SEC.

The defendant had 14 days from the Feb. 19 issuance of Rice’s order to pay.

Rice noted in the order that the final judgment was filed without Schmidt “admitting or denying the allegation of the (SEC) complaint.”

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The SEC called Schmidt’s actions a “long-running scheme.”

“From at least 2003 through 2017, Schmidt betrayed his customers’ trust by perpetrating a classic fraudulent scheme: he robbed Peter to pay Paul,” the SEC said in its original complaint.

The SEC charged that Schmidt sold the securities of some of his customers and secretly transferred more than $1 million in proceeds to 10 other customers to cover shortfalls in their accounts in a “rob Peter to pay Paul” arrangement.

The SEC said he attempted to cover unauthorized sales and withdrawals from variable annuities held by customers, “secretly transferring funds using fraudulent letters of authorization, and issuing fake account statements.”

Schmidt also faces criminal charges in Montgomery County Common Pleas Court. There, he was indicted in December on 128 felony counts related to alleged securities fraud in his work as a financial advisor.

“This is the last step in our district court litigation against Mr. Schmidt,” a spokeswoman for the SEC said Monday.

In the common pleas case, Schmidt and his attorneys have moved to suppress evidence investigators seized in a search of Schmidt’s Centerville home.

The motion argues that investigators had no probable cause to search his Paragon Road home and that the search itself was “too general, leaving too much discretion to law enforcement officers as to what is to be seized.”

Further, the motion argues that investigators relied on an “unreliable informant.”

The motion also seeks to suppress anything Schmidt said before he was read his Miranda rights.

An oral hearing on the motion is set for 1:30 p.m. Wednesday in Montgomery County Common Pleas Judge Gregory Singer’s court.

A message seeking comment was left with Schmidt’s Dayton-area attorney, Steven Pierson.

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