BREAKING NEWS: Montana Forges Partial Settlement In Case That Alleged Ponzi Schemer Took $100,000 From Investment Client, Paid Earlier Client $50,000, Paid Lawyer $25,000 And Pocketed $25,000; Major State Investigation Remains Open

Monica Lindeen, Montana Commissioner of Securities and Insurance

Monica Lindeen, Montana Commissioner of Securities and Insurance

UPDATED 9:28 P.M. EDT (U.S.A.) Donald Chouinard urged clients in Montana and Idaho to invest in what they thought was a “day-trading program,” authorities said.

In one case, he allegedly persuaded a client to borrow a large sum to enter the program. The case is remarkable in the sense that one of its specific allegations provides a perfect illustration of how victims get suckered and how Ponzi schemes work.

In a single transaction with an investor, all of the investor’s funds allegedly were consumed immediately, leaving the investor with nothing, authorities said.

“Chouinard convinced one investor to obtain a $100,000 loan and invest with him because he could guarantee a high return in 30 days,” investigators said. “Instead of investing the $100,000 in the ‘day-trading’ program, Chouinard used $50,000 to pay off a previous investor, deposited $25,000 into his personal joint-checking account, and gave the other $25,000 to his attorney.”

Montana Commissioner of Securities and Insurance Monica Lindeen announced a partial settlement today that calls for LPL Financial Corp. to pay nearly $1.3 million in restitution and a fine of $150,000 for failing to supervise Chouinard.

LPL formerly employed Chouinard, who also is associated with two other firms. The settlement with LPL, which neither admitted nor denied wrongdoing, applies only to LPL and does not affect separate actions involving Chouinard and the other firms, DC Wealth Management Inc. and DC Associates Inc.

“Too many hard working Montanans lost their savings due to the actions of Mr. Chouinard, but today we started the process of recovering those losses,” said Lindeen. “This settlement is the result of both efficient and effective enforcement work by this agency and a willingness by LPL Financial Corporation to arrive at a solution that addresses the needs of its clients. We are very pleased with this result.”

Among the assertions against Chouinard are that he operated a Ponzi scheme, engaged in securities fraud, traded in the investors’ accounts without authorization, forged signatures to authorize certain trades and failed to provide investors with statements or tax documents for their “day-trading” investments.

At the same time, investigators assert that Chouinard “routinely informed the investors about the values of their investments orally or via email,” but misrepresented the values — “in one case by as much as 10,000 [percent].”

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