Brighton man sanctioned for ‘get-rich-quick’ scheme

DENVER — A Brighton man has been barred from selling unregistered securities or acting as a securities broker-dealer in Colorado because of his involvement with a “get-rich-quick” trading scheme involving the offer and sale of pooled foreign-exchange trades.

A Denver District Court judge said James Ryan Hernbloom failed to disclose his lack of experience in the foreign-exchange field, that his combined trading records showed a net loss, and also because he was using investor funds for personal living expenses.

The court said Hernbloom also cannot act as a sales representative, investment adviser, or investment-adviser representative in the state.

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Hernbloom neither admitted nor denied the truth of the allegations filed by the state’s Division of Securities, part of the Department of Regulatory Agencies, earlier this month.

In the civil complaint, Gerald Rome, Colorado’s securities commissioner, alleged that in 2011, Hernbloom lured a friend into investing $30,000. Hernbloom represented that he had made a large profit on his own investments, but he failed to disclose that he was actually operating on a net loss of more than $11,000.  Hernbloom represented to the investor that his investment would remain liquid, and that he would be able to withdraw it. In reality, he used the money to pay his personal bills, according to the complaint.

Rome alleged that Hernbloom failed to issue regular account statements to investors, did not provide written disclosure documents and did not put the terms of the investments in writing.

The investor who had entrusted $30,000 to Hernbloom became aware of an issue upon requesting the return of his investment in 2012, and being told that his funds were not available. Following a complaint to the division, Hernbloom returned the initial principal to the investor.

“For me, one of the most concerning things is that Mr. Hernbloom failed to disclose the extremely risky nature of foreign-exchange trading,” Rome said in a prepared statement. “These are not investments that are suited to your typical retail investor, and anyone who doesn’t provide a warning of the potential risk is not fulfilling his obligation to serve the best interests of his clients.”