Barry Bekkedam, the former Villanova University basketball player who founded the Main Line investment advisory firm Ballamor Capital Management LLC in 1999, and built it into a $2 billion-asset business before giving up its Securities and Exchange Commission registration in 2010, "fraudulently induced, or assisted in inducing, his advisory clients and others to invest approximately $100 million in a fund" run by "now-convicted Ponzi-schemer Scott Rothstein," the Philadelphia office of the SEC alleges in a federal civil lawsuit filed today. Rothstein was convicted of federal criminal fraud charges in 2010, and is serving a 50-year sentence.
Christopher R. Hall, an attorney for the Saul Ewing law firm who represents Bekkedam, said he and his client had no immediate comment on the SEC lawsuit. Bekkedam, formerly of Villanova, now lives in Hobe Sound, Fla. Bekkedam has previously said he was a victim of the Ponzi scheme along with his clients. Prosecutors said Rothstein collected up to $1.2 billion from investors in the phony settlements; TD Bank and others who worked with Rothstein agreed to repay part of investors' losses.
According to the SEC, beginning in 2005, Rothstein, a Miami lawyer and financier, "falsely claimed" his legal clients were willing to sell rights to their court settlements to investors in exchange for discounted up-front payments, so investors could profit from the difference between what clients pocketed up front and the later court settlements.
In early 2009, when investors made desperate by the stock market collapse and low bond rates were seeking returns in non-traditional financial products, George Levin, of Fort Lauderdale, asked Bekkedam to help raise millions from clients for Rothstein's settlements. Levin and Bekkedam, with others, formed Banyon Income Fund LP to collect those investments and forward them to Rothstein. Bekkedam approached fellow investors in the former Nova Bank and other clients of his firm, and convinced some to buy into Banyon.
But according to the SEC, Bekkedam "made material misrepresentations and omissions" to his Ballamor clients in raising money for the settlements fund. Citing correspondence between Bekkedam and Levin, the SEC says Bekkedam failed to confirm Rothstein actually had legal settlements to finance, or that Rothstein was using clients' money for that purpose.
In fact, says the SEC, "Rothstein's investment program was nothing more than a Ponzi scheme." But until it collapsed in late October 2009, "Bekkedam continued to make material misstatements and omissions to his advisory clients and other prospective investors to induce them to invest in the Banyon Fund."
The SECD also alleges that Bekkedam "misrepresented and failed to disclose" to his clients that Levin had agreed to invest in Ballamor and in financially-troubled Nova Bank, which Bekkedam had founded and chaired, and to loan Bekkedam money, creating an undisclosed conflict of interest in which Bekkedam may have had a personal incentive to convince clients to invest in Rothstein's phony settlements.
The SEC wants Bekkedam to "disgorge any and all ill-gotten gains," plus interest. The SEC has a separate complaint pending against Levin.