SEC v. Jeremy Joseph Drake, No. 2:17-cv-06204, Central District of California (Aug. 22, 2017) — Complaint

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KRISTIN S. ESCALANTE (Cal. Bar No. 169635)
Email:  [email protected]
M. LANCE JASPER (Cal. Bar No. 244516)
Email:  [email protected]

Attorneys for Plaintiff
Securities and Exchange Commission
Michele Wein Layne, Regional Director
Alka N. Patel, Associate Regional Director
Amy J. Longo, Regional Trial Counsel
444 S. Flower Street, Suite 900
Los Angeles, California 90071
Telephone: (323) 965-3998
Facsimile: (213) 443-1904
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,

vs.
JEREMY JOSEPH DRAKE,
Defendant.

    Case    No.

COMPLAINT

Plaintiff Securities and Exchange Commission (“SEC”) alleges:
JURISDICTION AND VENUE
1. The Court has jurisdiction over this action pursuant to Sections 209(d),
209(e)(1) and 214 of the Investment Advisers Act of 1940 (“Advisers Act”), 15
U.S.C. §§ 80b-9(d), 80b-9(e)(1) & 90b-14.
2. Defendant has, directly or indirectly, made use of the means or
instrumentalities of interstate commerce, of the mails, or of the facilities of a national
securities exchange in connection with the transactions, acts, practices and courses of

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business alleged in this complaint.
3. Venue is proper in this district pursuant to Section 214 of the Advisers
Act, 15 U.S.C. § 90b-14, because one or more of the acts or transactions constituting
the violations alleged occurred within this district.  In addition, venue is proper in this
district because Defendant resides in this district.
SUMMARY
4. This action concerns an investment adviser who, in violation of his
fiduciary duties, deceived his clients about the advisory fees they were paying.
5. At all relevant times, Defendant Jeremy Joseph Drake (“Drake”) was an
investment adviser representative of HCR Wealth Advisors (“HCR”), a registered
investment adviser in Los Angeles.  From November 2012 until July 2016, Drake
deceived two clients, a married couple holding joint accounts (“the Clients” or “Mr.
A” and “Ms. A”), about the annual management fees they were paying HCR.  Drake
told the Clients, a high-profile professional athlete and his spouse, that they were
being charged a special, VIP rate of between 0.15% and 0.20% of their assets under
management, when, in fact, they were being charged and paying 1.0%.  During the
course of Drake’s deception, the Clients paid approximately $1.5 million in
management fees − over $1.2 million more than Drake represented to the Clients that
they were paying − and Drake received approximately $900,000 of those fees as
incentive-based compensation.  Drake perpetrated this deception by repeatedly lying
to the Clients and their representatives in person, in text messages, and over the
telephone.  He also sent the Clients and their representatives false and misleading
emails, deceptive management fee reports, and a number of fabricated documents to
corroborate his lies.  The fabricated documents that Drake sent included falsified
account statements of the brokerage firm where Clients’ securities were held and a
falsified investment advisory agreement from HCR.  Drake also used a fake email
address – which he said belonged to a manager at the Clients’ brokerage firm – to
send more deceptive emails and false documents concerning the Clients’ fees, and

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persuaded a confederate to pose as a manager at the Clients’ brokerage firm and
corroborate his story.  In so doing, Drake violated the fiduciary duties that he owed to
the Clients.
6. By engaging in this conduct, Drake violated Sections 206(1) and 206(2)
of the Advisers Act, 15 U.S.C. §§ 80b-6(1) & 80b-6(2), or, in the alternative, aided
and abetted HCR’s uncharged violations of those provisions.  The SEC seeks a
permanent injunction, disgorgement with prejudgment interest, and civil penalties
against Drake.
THE DEFENDANT
7. Drake resides in Los Angeles, CA.  He holds a Series 66 license.  Drake
worked as a registered investment adviser representative of HCR from March 2009
until early July 2016, when HCR terminated him for his misconduct concerning the
Clients’ accounts.  Before his termination, Drake managed over $50 million in assets
for more than 20 clients.  Drake is currently associated with an investment adviser
registered with the State of California.
FACTUAL ALLEGATIONS
A. HCR’s Management Fees and Drake’s Compensation
8. HCR is a California corporation organized on September 1, 1986, with
its principal place of business in Los Angeles, California.  HCR has been registered
with the SEC as an investment adviser since April 16, 1999.  As of February 2017,
HCR reported having approximately 500 clients and $900 million in assets under
management.
9. HCR maintains its client accounts at Charles Schwab & Co., Inc.
(“Schwab”).  Schwab serves as the custodian for HCR’s clients’ securities and HCR
trades on behalf of its clients through Schwab.   Therefore, each HCR client typically
has one or more accounts at Schwab, managed by HCR.
10. HCR charges its clients an annual management fee for investment
adviser services.  The fees, which are billed quarterly in advance, are automatically

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deducted from the Schwab accounts and paid to HCR.  HCR’s management fees
typically start at 1.0% of a client’s assets under management, but clients sometimes
negotiate lower fees with HCR.
11. A significant portion of Drake’s personal compensation at HCR came
from the fees HCR charged clients for assets under his management.  During Drake’s
first three years at HCR, the firm paid him a $60,000 annual salary plus “incentive-
based compensation” of between 40% and 50% of those fees.  In April 2013, at his
request, HCR agreed to pay Drake 60% of his clients’ management fees in lieu of a
salary, and HCR paid Drake under that new agreement for the remainder of his time
with HCR.
B. The Clients’ Stated Management Fees
12. Drake met the Clients in 2008, when he worked for another investment
adviser.  The Clients ultimately placed more than $35 million of their assets under
Drake’s management, and Drake was the Clients’ sole contact at HCR during the
time he acted as their investment adviser.  As an investment adviser responsible for
the day-to-day management of the Clients’ investments, Drake owed the Clients a
fiduciary duty.
13. On behalf of the Clients, Ms. A signed an “Investment Advisory
Agreement” with HCR in September 2009.  Drake signed on behalf of HCR.  The
agreement stated that the Clients would pay an annual management fee equal to 1.0%
of the assets under HCR’s management and that the agreement would renew
automatically each quarter.  The agreement further stated that it could be terminated
unilaterally by either party.  Ms. A and her assistants and accountant primarily
communicated with Drake concerning management of the Clients’ assets and Clients’
management fees.
14. Based on her conversations with Drake, Ms. A believed the agreement
expired unless it was renewed each year.  As a result, and because the Client never
signed another contract with HCR, she believed the Clients did not have a written

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agreement with HCR after 2009.  Instead, as explained in detail below, she sought to
determine what the Clients were paying in fees after 2009, and Drake repeatedly and
expressly represented to her that the actual fees that the Clients were being charged
were much lower than 1.0%.
15. HCR charged the Clients a 1.0% management fee throughout the time
they were Drake’s clients, which Schwab deducted each quarter from the Clients’
accounts and paid to HCR.
C. Drake’s Deception Regarding Fees
16. Ms. A met with Drake once or twice each year to discuss the Clients’
accounts.  English is not Ms. A’s first language, and she always brought an assistant
to act as an interpreter.  In advance of a meeting in November 2012, Ms. A asked her
assistant to help her understand how much the Clients were paying HCR in
management fees.  Per Ms. A’s instructions, the assistant emailed Drake and asked
if, at the next meeting, Drake “would be able to provide a simple explanation of all
the fees, expenses and charges the [Clients] pay in regards to all the services they
receive from [HCR].”  In reply, Drake agreed to provide “a detailed explanation of all
fees associated with the work [HCR] provides.”
17. Ms. A and her assistant met with Drake shortly thereafter, on or about
November 20, 2012.  During the meeting, Drake told Ms. A and her assistant that,
since 2010, the Clients had paid a special “VIP” rate of between 0.15% and 0.20%.
Specifically, Drake told Ms. A and the assistant that the Clients had paid an initial fee
of 1%, but then received periodic “credits” in their brokerage accounts that resulted in
a “net” fee in the discounted range.  These statements were false.  The Clients were in
fact paying fees equal to 1% of their assets under management with no credits that
resulted in a “net” fee in the discounted range.  Drake did not inform clients of this
fact, even though Drake had received a percentage of those fees as part of his
compensation.
18. Ms. A and her assistant met with Drake again in April 2013.  After that

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meeting, the assistant asked Drake, on behalf of Ms. A, to further clarify the
management fees.  Drake again represented that the Clients were paying between
0.15% and 0.20% of their assets under management.  Drake offered to provide
documents to help the Clients understand the fees and credits, and the assistant asked
him to do so.
19. Shortly thereafter, on April 29, 2013, Drake emailed Ms. A’s assistant
“management fee reports” that purported to set forth the management fees for two of
the Clients’ accounts.  The first report purported to list the quarterly fees paid from
one of the Clients’ accounts during 2010, 2011, and 2012, along with purported
“credits” against those fees.  According to the report, the effect of the credits was to
offset the Clients’ fees by approximately 83%, resulting in a purported “net” rate of
0.177% and purported “net” fees of $44,994.  The second report listed quarterly fees
paid from another of the Clients’ accounts in 2011 and 2012, along with purported
“credits” that offset those fees.  That report purported to show that credits offset the
fees by 85%, resulting in a “net” rate of 0.15% and “net” fees of $34,737.  The
assistant shared these reports with Ms. A.
20. The purported “credits,” “net” rates, and “net” fees in those reports were
a fabrication.  In reality, the Clients had been charged and had paid all of the
quarterly fees listed in those reports, but received none of the credits.  Whereas the
reports said they had paid “net” rates of 0.177% and 0.15%, resulting in “net” fees of
$44,994 and $34,737, they had in fact paid a 1.0% rate in both accounts, resulting in
actual fees paid of $280,349 and $231,889.  The total difference between what Drake
said the Clients had paid from those accounts during those periods, and what they
actually paid, was more than $430,000.   Approximately $190,000 of those fees went
to Drake.
21. Just one day after Drake sent the false fee reports, he re-negotiated with
HCR to receive a higher percentage of the management fees HCR charged his clients,
moving from a range of between 40% and 50%, to a flat rate of 60%.

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22. In early 2014, Ms. A hired a new assistant to take over for her previous
assistant, who had taken another job.  She asked the new assistant to help her
understand HCR’s fees, since she was still confused about how the purported fee-
credit system worked.  Starting in May 2014, the new assistant asked Drake for
reports to confirm the fees paid and credits received.  Over the next several months,
Drake repeatedly told Ms. A and the new assistant that the Clients were being
charged a 1.0% fee, which was reduced by “credits” that resulted in a “[n]et fee of
approximately 0.15% after the credits have been processed,” and repeatedly sent
them false and misleading documents to support that explanation.
23. On June 2, 2014, for instance, the new assistant asked Drake for
documents reflecting the timing and amounts of the fees and credits so that he and
Ms. A could review them.  The next day, Drake emailed what he described as “the
most recent management fee reports from Schwab” for the Clients’ accounts.  The
email itself purported to list fee credits, net fees, and fee percentages for three of the
Clients’ accounts, all of which was false information because the Clients had received
no such credits.  The attachments that Drake included with that email seemed to
support his explanation, and appeared to be authentic statements from Schwab
concerning the Clients’ accounts.  In fact, they were doctored Schwab statements that
Drake had altered to include “ADVISOR FEE CREDIT” entries that did not exist in
the originals.  When the new assistant expressed an inability to make sense of those
entries, Drake sent him a lengthy explanation concerning how Schwab ostensibly
paid the credits, and stated that the complicated process he was purporting to explain
was put in place only for “top tier clients.”  Drake further represented that he made
sure the system was in place for the Clients because of their “fee sensitivity.”
Drake’s representations regarding the fee credits were false.
24. Drake continued to send false and misleading emails and documents to
Ms. A and the new assistant thereafter.  On June 16, 2014, for instance, Drake sent
Ms. A’s assistant a wholly fabricated brokerage statement – complete with Schwab’s

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logo in the upper-right hand corner – that purportedly reflected “credits” and “net”
fees for the Clients’ accounts going back to 2010.  Similarly, on September 11, 2014,
Drake emailed Ms. A’s assistant a purported “[Client] Account Management Fee
Summary” with purported “fee credits” and represented that it was “the complete and
accurate accounting for the management fees to date.”  In an apparent attempt to end
the discussion, Drake insisted that the numbers were correct, and that Ms. A would
have to accept them as is, even though the “accounting” and “legal requirements”
made them hard to understand.
25. In early 2016, Ms. A tried again to understand the management fees, this
time with the aid of a third assistant and a newly hired accountant.  Over the next
several months, Drake repeatedly made false and misleading representations to all
three of them in their efforts to understand the fees.
26. For example, on April 12, 2016, Drake sent the third assistant false and
misleading fee reports for the Clients’ accounts concerning the first quarter of 2016,
which the assistant forwarded to Ms. A.  Drake also sent the third assistant fabricated
transaction statements that bore Schwab’s logo and that included false fee credits.
27. On April 22, 2016, Drake sent the third assistant a text message saying
that the Clients had “always” paid between 0.15% and 0.20% based on the agreement
they signed with HCR, and that the credits “primarily came from bond interest paid
by Schwab.”  This was a false statement.
28. On April 23, 2016, Drake emailed Ms. A and the third assistant a
lengthy and false explanation of the management fees and “credits” in an apparent
attempt to resolve the issue, insisting that the Clients need not worry about the tax
consequences of the credits because they were paid using tax-free bonds.  These
again were false statements.
29. On April 25, 2016, Drake sent the third assistant a fabricated HCR
Investment Advisory Agreement, supposedly dated September 8, 2009, that provided
for “net” fees of between 0.15% and 0.20%.  The document’s metadata shows that it

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was created the same day Drake sent it to the third assistant, and not on or around
September 8, 2009.
30. Also on April 25, 2016, Drake sent Ms. A and the third assistant false
and misleading documents that purported to illustrate a contractual arrangement
between HCR and Schwab through which Schwab agreed to pay fee credits to the
Clients.
31. On April 27, 2016, Drake sent the third assistant a lengthy, false
explanation about Schwab’s purported payment of the fee credits, and explained that
Drake personally verified the credits each quarter.
32. On May 9, 2016, Drake sent Ms. A’s accountant an email in which he
purported to attach “the quarterly review produced by Schwab that summarizes the
1.00% fee, the net credits, and the resulting net account fee to the [Clients].”  The
report was fabricated.  At the bottom of the email, Drake included a fabricated email
purportedly from Schwab in order to make it appear that he was simply forwarding a
report sent to him by the brokerage firm.
33. In mid-May 2016, Drake falsely represented to Ms. A’s accountant over
the telephone that the Clients’ fee credits were paid out of interest earned on bonds.
34. On May 31, 2016, Drake emailed Ms. A, the accountant, and the third
assistant two fabricated letters, ostensibly on Schwab’s letterhead, concerning the
“credits” and their tax implications.  The first letter, dated October 1, 2009, was a
purported agreement between HCR and Schwab that purported to provide that the
Clients would be charged net fees of between 0.15% and 0.20% by HCR.  No such
agreement existed.  The second fabricated letter, dated May 27, 2016, stated that
Schwab would work to limit the Clients’ tax liability from the credits.
D. Drake’s Use of a False Persona to Perpetuate the Deception
35. In early June 2016, Ms. A asked Drake to provide a contact person at
Schwab who could explain the fee credits.  She expressed frustration that she and her
assistants and accountant were still unable to understand the credits after so much

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time, and that she wanted a clear explanation of everything immediately.  In response,
Drake created a false persona named “Ron Stenson” whom he held out as an
employee of “Charles Schwab Advisor Services” who could help explain the fee-
credit system.  He then created a misleading “Ron Stenson” email address,
[email protected], from which he sent Ms. A, the third assistant, and the
accountant a number of false and misleading emails and attachments, including
fabricated documents bearing a “Charles Schwab Advisory Services” logo.  At times,
Drake participated in email communications with them as both Ron Stenson and
himself, using a personal email address when emailing as himself, and using the
[email protected] address when emailing as Ron Stenson.  Drake sent more
than a dozen “Ron Stenson” emails to Ms. A and her representatives in June 2016.
36. Drake also licensed a telephone number from an Internet telephone
provider, which he gave to Ms. A and her representatives as a number to use to call
Ron Stenson, and for which he set up a voicemail box to receive calls.  Drake then
connected Ms. A’s accountant with a confederate who posed as Ron Stenson in two
or three telephone calls with the accountant and purported to corroborate Drake’s
explanation of the fees and credits.
E. Drake’s Confession to Ms. A
37. Toward the end of June 2016, Ms. A came to believe that Drake had
been lying to her about the management fees for years.  Ms. A contacted Schwab,
prompting Schwab to contact HCR about Drake.
38. On July 4, 2016, Drake sent Ms. A an email in which he confessed to
lying about the management fees in order to keep the Clients’ business.  He admitted
there was no “credit” system that reduced the Clients’ fees, and that they had paid
higher fees than they were told.  He also confessed to “sending false information” and
“involving another person to confirm the false story.”
39. In the same email, Drake pleaded with Ms. A to help him keep his
securities license by asking her to lie to Schwab about the source of the fabricated

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documents.  Drake told her that he might be able to keep working as an adviser if Ms.
A would tell Schwab that someone else had sent her the documents.  Drake also
warned Ms. A that escalating his misconduct with the brokerage firm could result in
bad publicity for Mr. A.  Ms. A refused to lie for Drake.
40. HCR terminated Drake on July 8, 2016.
F. Drake’s Scienter and the Materiality of his False Statements
41.   During all relevant times, Drake acted with scienter.  Drake knowingly
or recklessly provided false information to Ms. A about the fees the Clients were
being charged, knowingly or recklessly created and sent her fabricated documents,
and knowingly or recklessly created a false persona to communicate with Ms. A.
Upon discovery of his deception, Drake admitted to Ms. A that he deceived her to
avoid losing her as a client.
42. In addition, Drake failed to exercise reasonable care by providing the
Clients materially false information about their management fees, and using false
documentation and a false persona to conceal the true fees from the Clients.
43. Drake’s fraudulent acts were material.  The fees charged by an
investment adviser are important to investment adviser clients, and the difference
between a fee of 1% and a fee of 0.15% to 0.20% is a material difference.
G. Drake’s Role as an Investment Adviser
44. During all relevant times, HCR was registered as an investment adviser
with the SEC, and Drake was associated with HCR.
45. While associated with HCR, Drake managed his clients’ securities
accounts on a discretionary basis, including the Clients’ accounts.  He acted as the
sole representative of HCR when advising the Clients about their accounts; the
Clients looked exclusively to Drake to manage those accounts; and, pursuant to the
discretionary authority that the Clients had granted, Drake personally managed the
Clients’ investments in those accounts throughout their relationship.  Drake received
compensation in connection with those services, starting with a salary from HCR plus

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between 40% and 50% of the management fees generated by his clients.  After March
2013, he received 60% of the management fees paid by these and his other clients.
Accordingly, Drake was an investment adviser.
46. In committing the acts alleged herein, Drake acted within the course and
scope of his employment with HCR.  Drake was solely responsible for managing
HCR’s relationship with the Clients from the time the Clients became HCR’s clients
until the Clients ended their relationship with Drake and HCR in June 2016.  In
committing the violations alleged in this Complaint, Drake acted for himself and for
the benefit of HCR.
47. As an investment adviser, Drake owed his clients a fiduciary duty and
was prohibited from making untrue statements of material fact or from omitting to
state material facts necessary to make his statements not misleading.  Drake violated
these obligations by committing the acts alleged in this Complaint.
48. Alternatively, Drake aided and abetted HCR’s violations of its fiduciary
duties to the Clients.  HCR, acting through Drake, knowingly or recklessly violated
Sections 206(1) and (2) of the Advisers Act, 15 U.S.C. §§ 80b-6(1) & 80b-6(2).
Drake knew of or recklessly disregarded the wrong and his role in furthering it and
substantially assisted HCR’s violation.
FIRST CLAIM FOR RELIEF
Fraud by an Investment Adviser
Violations of Sections 206(1) and 206(2) of the Advisers Act
49. The SEC realleges and incorporates by reference paragraphs 1 through
48 above.
50. By managing the Clients’ securities accounts on a discretionary basis in
return for compensation and otherwise performing the acts alleged in this Complaint,
Drake acted as an investment adviser.
51. By engaging in the conduct described above, Drake, directly or
indirectly, by use of the mails or means and instrumentalities of interstate commerce:

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(a) with scienter, employed devices, schemes or artifices to defraud clients or
prospective clients; and (b) engaged in transactions, practices, or courses of business
which operated as a fraud or deceit upon clients or prospective clients.
52. Specifically, among other things, Drake knowingly, recklessly and
negligently lied to the Clients and their representatives about the amount the Clients
were paying in management fees, provided false and misleading information about
those fees, fabricated and sent false documents, created a false persona to support his
deception, and enlisted a confederate to assist in deceiving the Clients.
53. By engaging in the conduct described above, Drake has violated, and
unless enjoined, will continue to violate, Sections 206(1) and (2) of the Advisers Act,
15 U.S.C. §§ 80b-6(1) & 80b-6(2).
SECOND CLAIM FOR RELIEF
Aiding and Abetting Fraud by an Investment Adviser
Violations of Sections 206(1) and 206(2) of the Advisers Act
54. The SEC realleges and incorporates by reference paragraphs 1 through
48 above.
55. HCR is a registered investment adviser.
56. Drake committed the acts alleged above during the course and scope of
his employment with HCR.
57. Through the acts of Drake alleged above, HCR violated Sections 206(1)
and 206(2) of the Advisers Act, 15 U.S.C. § 80b-6(1) and (2).  Specifically, by use of
the mails or means or instrumentalities of interstate commerce, HCR, directly or
indirectly, (a) with scienter, employed devices, schemes or artifices to defraud clients,
or (b) engaged in transactions, practices or courses of business which operated as a
fraud or deceit upon clients.
58. Drake knew of or recklessly disregarded the wrongful acts and knew of
or recklessly disregarded his own role in furthering the wrong.
59. Drake knowingly provided substantial assistance to HCR in its violations

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of Section 206(1) and 206(2) of the Advisers Act, 15 U.S.C. § 80b-6(1) and (2).
60. By reason of the actions alleged in this Complaint, pursuant to Sections
209(d) and (f) of the Advisers Act, 15 U.S.C. § 80b-9(d) and (f), Drake aided and
abetted, and, unless enjoined, will continue to aid and abet, violations of Sections
206(1) and 206(2) of the Advisers Act, 15 U.S.C. § 80b-6(2).
PRAYER FOR RELIEF
WHEREFORE, the SEC respectfully requests that the Court:
I.
Issue findings of fact and conclusions of law that Drake committed the alleged
violations.
II.
Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of
Civil Procedure, permanently enjoining Drake, and his officers, agents, servants,
employees and attorneys, and those persons in active concert or participation with
any of them, who receive actual notice of the judgment by personal service or
otherwise, and each of them, from violating, or, in the alternative, from aiding and
abetting any violation of, Sections 206(1) and (2) of the Advisers Act, 15 U.S.C. §§
80b-6(1) & 80b-6(2).
III.
Order Drake to disgorge all funds received from his illegal conduct, together
with prejudgment interest thereon.
IV.
Order Drake to pay civil penalties under Section 209(e)(1) of the Advisers Act,
15 U.S.C. § 80b-9(e)(1).
V.
Retain jurisdiction of this action in accordance with the principles of equity and
the Federal Rules of Civil Procedure in order to implement and carry out the terms of
all orders and decrees that may be entered, or to entertain any suitable application or

COMPLAINT
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motion for additional relief within the jurisdiction of this Court.
VI.
Grant such other and further relief as this Court may determine to be just and
necessary.
Dated:  August 22, 2017

/s/ Kristin S. Escalante
Kristin S. Escalante
Attorney for Plaintiff
Securities and Exchange Commission

Complaints and Other Initiating Documents
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
Notice of Electronic Filing
The following transaction was entered by Escalante, Kristin on 8/22/2017 at 10:37 AM PDT and filed on
8/22/2017
Docket Text:
COMPLAINT No Fee Required - US Government, filed by Plaintiff Securities and
Exchange Commission. (Attorney Kristin S Escalante added to party Securities and
Exchange Commission(pty:pla))(Escalante, Kristin)
2:17-cv-06204 Notice has been electronically mailed to:
Kristin S Escalante     [email protected], [email protected], [email protected], [email protected]
2:17-cv-06204 Notice has been delivered by First Class U. S. Mail or by other means BY THE
FILER to :
The following document(s) are associated with this transaction:
2:17
-cv-06204 Securities and Exchange Commission v. Drake
Case Name:Securities and Exchange Commission v. Drake
Case Number:2:17-cv-06204
Filer:Securities and Exchange Commission
Document Number:1
Document description:Main Document
Original filename:J:\ENF\LA-04737\LITIGATION FILES\DRAFTS\PLEADINGS & SETTLEMENTS
- DRAFTS\Drake Complaint - FINAL FINAL (FINAL).pdf
Electronic document Stamp:
[STAMP cacdStamp_ID=1020290914 [Date=8/22/2017] [FileNumber=24085144-0
] [3a3b2a965ba4141c64eaeacc2dd504f63347c5c82176c554e46c0a16c7e03330fd6
32155062482792f9dc0e79c89aac9c54e8079220f086ce2be1aab5eac0fea]]
Page 1 of 1CM/ECF - California Central District
8/22/2017https://ecf.cacd.uscourts.gov/cgi-bin/Dispatch.pl?726283955284267

COMPLAINT 1  

 

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KRISTIN S. ESCALANTE (Cal. Bar No. 169635) 
Email:  [email protected] 
M. LANCE JASPER (Cal. Bar No. 244516) 
Email:  [email protected] 
 
Attorneys for Plaintiff 
Securities and Exchange Commission 
Michele Wein Layne, Regional Director 
Alka N. Patel, Associate Regional Director 
Amy J. Longo, Regional Trial Counsel 
444 S. Flower Street, Suite 900 
Los Angeles, California 90071 
Telephone: (323) 965-3998 
Facsimile: (213) 443-1904 

UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 
 

vs. 

JEREMY JOSEPH DRAKE, 

Defendant. 
 

 Case No. 
 
 
COMPLAINT 
 

 
 
 

Plaintiff Securities and Exchange Commission (“SEC”) alleges: 

JURISDICTION AND VENUE 

1. The Court has jurisdiction over this action pursuant to Sections 209(d), 

209(e)(1) and 214 of the Investment Advisers Act of 1940 (“Advisers Act”), 15 

U.S.C. §§ 80b-9(d), 80b-9(e)(1) & 90b-14. 

2. Defendant has, directly or indirectly, made use of the means or 

instrumentalities of interstate commerce, of the mails, or of the facilities of a national 

securities exchange in connection with the transactions, acts, practices and courses of 

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COMPLAINT 2  

 

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business alleged in this complaint.  

3. Venue is proper in this district pursuant to Section 214 of the Advisers 

Act, 15 U.S.C. § 90b-14, because one or more of the acts or transactions constituting 

the violations alleged occurred within this district.  In addition, venue is proper in this 

district because Defendant resides in this district. 

SUMMARY 

4. This action concerns an investment adviser who, in violation of his 

fiduciary duties, deceived his clients about the advisory fees they were paying.   

5. At all relevant times, Defendant Jeremy Joseph Drake (“Drake”) was an 

investment adviser representative of HCR Wealth Advisors (“HCR”), a registered 

investment adviser in Los Angeles.  From November 2012 until July 2016, Drake 

deceived two clients, a married couple holding joint accounts (“the Clients” or “Mr. 

A” and “Ms. A”), about the annual management fees they were paying HCR.  Drake 

told the Clients, a high-profile professional athlete and his spouse, that they were 

being charged a special, VIP rate of between 0.15% and 0.20% of their assets under 

management, when, in fact, they were being charged and paying 1.0%.  During the 

course of Drake’s deception, the Clients paid approximately $1.5 million in 

management fees − over $1.2 million more than Drake represented to the Clients that 

they were paying − and Drake received approximately $900,000 of those fees as 

incentive-based compensation.  Drake perpetrated this deception by repeatedly lying 

to the Clients and their representatives in person, in text messages, and over the 

telephone.  He also sent the Clients and their representatives false and misleading 

emails, deceptive management fee reports, and a number of fabricated documents to 

corroborate his lies.  The fabricated documents that Drake sent included falsified 

account statements of the brokerage firm where Clients’ securities were held and a 

falsified investment advisory agreement from HCR.  Drake also used a fake email 

address – which he said belonged to a manager at the Clients’ brokerage firm – to 

send more deceptive emails and false documents concerning the Clients’ fees, and 

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COMPLAINT 3  

 

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persuaded a confederate to pose as a manager at the Clients’ brokerage firm and 

corroborate his story.  In so doing, Drake violated the fiduciary duties that he owed to 

the Clients. 

6. By engaging in this conduct, Drake violated Sections 206(1) and 206(2) 

of the Advisers Act, 15 U.S.C. §§ 80b-6(1) & 80b-6(2), or, in the alternative, aided 

and abetted HCR’s uncharged violations of those provisions.  The SEC seeks a 

permanent injunction, disgorgement with prejudgment interest, and civil penalties 

against Drake. 

THE DEFENDANT 

7. Drake resides in Los Angeles, CA.  He holds a Series 66 license.  Drake 

worked as a registered investment adviser representative of HCR from March 2009 

until early July 2016, when HCR terminated him for his misconduct concerning the 

Clients’ accounts.  Before his termination, Drake managed over $50 million in assets 

for more than 20 clients.  Drake is currently associated with an investment adviser 

registered with the State of California.   

FACTUAL ALLEGATIONS 

A. HCR’s Management Fees and Drake’s Compensation 

8. HCR is a California corporation organized on September 1, 1986, with 

its principal place of business in Los Angeles, California.  HCR has been registered 

with the SEC as an investment adviser since April 16, 1999.  As of February 2017, 

HCR reported having approximately 500 clients and $900 million in assets under 

management.   

9. HCR maintains its client accounts at Charles Schwab & Co., Inc. 

(“Schwab”).  Schwab serves as the custodian for HCR’s clients’ securities and HCR 

trades on behalf of its clients through Schwab.   Therefore, each HCR client typically 

has one or more accounts at Schwab, managed by HCR. 

10. HCR charges its clients an annual management fee for investment 

adviser services.  The fees, which are billed quarterly in advance, are automatically 

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COMPLAINT 4  

 

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deducted from the Schwab accounts and paid to HCR.  HCR’s management fees 

typically start at 1.0% of a client’s assets under management, but clients sometimes 

negotiate lower fees with HCR.   

11. A significant portion of Drake’s personal compensation at HCR came 

from the fees HCR charged clients for assets under his management.  During Drake’s 

first three years at HCR, the firm paid him a $60,000 annual salary plus “incentive-

based compensation” of between 40% and 50% of those fees.  In April 2013, at his 

request, HCR agreed to pay Drake 60% of his clients’ management fees in lieu of a 

salary, and HCR paid Drake under that new agreement for the remainder of his time 

with HCR. 

B. The Clients’ Stated Management Fees 

12. Drake met the Clients in 2008, when he worked for another investment 

adviser.  The Clients ultimately placed more than $35 million of their assets under 

Drake’s management, and Drake was the Clients’ sole contact at HCR during the 

time he acted as their investment adviser.  As an investment adviser responsible for 

the day-to-day management of the Clients’ investments, Drake owed the Clients a 

fiduciary duty. 

13. On behalf of the Clients, Ms. A signed an “Investment Advisory 

Agreement” with HCR in September 2009.  Drake signed on behalf of HCR.  The 

agreement stated that the Clients would pay an annual management fee equal to 1.0% 

of the assets under HCR’s management and that the agreement would renew 

automatically each quarter.  The agreement further stated that it could be terminated 

unilaterally by either party.  Ms. A and her assistants and accountant primarily 

communicated with Drake concerning management of the Clients’ assets and Clients’ 

management fees. 

14. Based on her conversations with Drake, Ms. A believed the agreement 

expired unless it was renewed each year.  As a result, and because the Client never 

signed another contract with HCR, she believed the Clients did not have a written 

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COMPLAINT 5  

 

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agreement with HCR after 2009.  Instead, as explained in detail below, she sought to 

determine what the Clients were paying in fees after 2009, and Drake repeatedly and 

expressly represented to her that the actual fees that the Clients were being charged 

were much lower than 1.0%.  

15. HCR charged the Clients a 1.0% management fee throughout the time 

they were Drake’s clients, which Schwab deducted each quarter from the Clients’ 

accounts and paid to HCR. 

C. Drake’s Deception Regarding Fees 

16. Ms. A met with Drake once or twice each year to discuss the Clients’ 

accounts.  English is not Ms. A’s first language, and she always brought an assistant 

to act as an interpreter.  In advance of a meeting in November 2012, Ms. A asked her 

assistant to help her understand how much the Clients were paying HCR in 

management fees.  Per Ms. A’s instructions, the assistant emailed Drake and asked  

if, at the next meeting, Drake “would be able to provide a simple explanation of all 

the fees, expenses and charges the [Clients] pay in regards to all the services they 

receive from [HCR].”  In reply, Drake agreed to provide “a detailed explanation of all 

fees associated with the work [HCR] provides.”    

17. Ms. A and her assistant met with Drake shortly thereafter, on or about 

November 20, 2012.  During the meeting, Drake told Ms. A and her assistant that, 

since 2010, the Clients had paid a special “VIP” rate of between 0.15% and 0.20%.  

Specifically, Drake told Ms. A and the assistant that the Clients had paid an initial fee 

of 1%, but then received periodic “credits” in their brokerage accounts that resulted in 

a “net” fee in the discounted range.  These statements were false.  The Clients were in 

fact paying fees equal to 1% of their assets under management with no credits that 

resulted in a “net” fee in the discounted range.  Drake did not inform clients of this 

fact, even though Drake had received a percentage of those fees as part of his 

compensation.   

18. Ms. A and her assistant met with Drake again in April 2013.  After that 

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COMPLAINT 6  

 

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meeting, the assistant asked Drake, on behalf of Ms. A, to further clarify the 

management fees.  Drake again represented that the Clients were paying between 

0.15% and 0.20% of their assets under management.  Drake offered to provide 

documents to help the Clients understand the fees and credits, and the assistant asked 

him to do so. 

19. Shortly thereafter, on April 29, 2013, Drake emailed Ms. A’s assistant 

“management fee reports” that purported to set forth the management fees for two of 

the Clients’ accounts.  The first report purported to list the quarterly fees paid from 

one of the Clients’ accounts during 2010, 2011, and 2012, along with purported 

“credits” against those fees.  According to the report, the effect of the credits was to 

offset the Clients’ fees by approximately 83%, resulting in a purported “net” rate of 

0.177% and purported “net” fees of $44,994.  The second report listed quarterly fees 

paid from another of the Clients’ accounts in 2011 and 2012, along with purported 

“credits” that offset those fees.  That report purported to show that credits offset the 

fees by 85%, resulting in a “net” rate of 0.15% and “net” fees of $34,737.  The 

assistant shared these reports with Ms. A. 

20. The purported “credits,” “net” rates, and “net” fees in those reports were 

a fabrication.  In reality, the Clients had been charged and had paid all of the 

quarterly fees listed in those reports, but received none of the credits.  Whereas the 

reports said they had paid “net” rates of 0.177% and 0.15%, resulting in “net” fees of 

$44,994 and $34,737, they had in fact paid a 1.0% rate in both accounts, resulting in 

actual fees paid of $280,349 and $231,889.  The total difference between what Drake 

said the Clients had paid from those accounts during those periods, and what they 

actually paid, was more than $430,000.   Approximately $190,000 of those fees went 

to Drake.   

21. Just one day after Drake sent the false fee reports, he re-negotiated with 

HCR to receive a higher percentage of the management fees HCR charged his clients, 

moving from a range of between 40% and 50%, to a flat rate of 60%.   

Case 2:17-cv-06204   Document 1   Filed 08/22/17   Page 6 of 15   Page ID #:6



 

COMPLAINT 7  

 

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22. In early 2014, Ms. A hired a new assistant to take over for her previous 

assistant, who had taken another job.  She asked the new assistant to help her 

understand HCR’s fees, since she was still confused about how the purported fee-

credit system worked.  Starting in May 2014, the new assistant asked Drake for 

reports to confirm the fees paid and credits received.  Over the next several months, 

Drake repeatedly told Ms. A and the new assistant that the Clients were being 

charged a 1.0% fee, which was reduced by “credits” that resulted in a “[n]et fee of 

approximately 0.15% after the credits have been processed,” and repeatedly sent 

them false and misleading documents to support that explanation.   

23. On June 2, 2014, for instance, the new assistant asked Drake for 

documents reflecting the timing and amounts of the fees and credits so that he and 

Ms. A could review them.  The next day, Drake emailed what he described as “the 

most recent management fee reports from Schwab” for the Clients’ accounts.  The 

email itself purported to list fee credits, net fees, and fee percentages for three of the 

Clients’ accounts, all of which was false information because the Clients had received 

no such credits.  The attachments that Drake included with that email seemed to 

support his explanation, and appeared to be authentic statements from Schwab 

concerning the Clients’ accounts.  In fact, they were doctored Schwab statements that 

Drake had altered to include “ADVISOR FEE CREDIT” entries that did not exist in 

the originals.  When the new assistant expressed an inability to make sense of those 

entries, Drake sent him a lengthy explanation concerning how Schwab ostensibly 

paid the credits, and stated that the complicated process he was purporting to explain 

was put in place only for “top tier clients.”  Drake further represented that he made 

sure the system was in place for the Clients because of their “fee sensitivity.”  

Drake’s representations regarding the fee credits were false. 

24. Drake continued to send false and misleading emails and documents to 

Ms. A and the new assistant thereafter.  On June 16, 2014, for instance, Drake sent 

Ms. A’s assistant a wholly fabricated brokerage statement – complete with Schwab’s 

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COMPLAINT 8  

 

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logo in the upper-right hand corner – that purportedly reflected “credits” and “net” 

fees for the Clients’ accounts going back to 2010.  Similarly, on September 11, 2014, 

Drake emailed Ms. A’s assistant a purported “[Client] Account Management Fee 

Summary” with purported “fee credits” and represented that it was “the complete and 

accurate accounting for the management fees to date.”  In an apparent attempt to end 

the discussion, Drake insisted that the numbers were correct, and that Ms. A would 

have to accept them as is, even though the “accounting” and “legal requirements” 

made them hard to understand.    

25. In early 2016, Ms. A tried again to understand the management fees, this 

time with the aid of a third assistant and a newly hired accountant.  Over the next 

several months, Drake repeatedly made false and misleading representations to all 

three of them in their efforts to understand the fees.   

26. For example, on April 12, 2016, Drake sent the third assistant false and 

misleading fee reports for the Clients’ accounts concerning the first quarter of 2016, 

which the assistant forwarded to Ms. A.  Drake also sent the third assistant fabricated 

transaction statements that bore Schwab’s logo and that included false fee credits. 

27. On April 22, 2016, Drake sent the third assistant a text message saying 

that the Clients had “always” paid between 0.15% and 0.20% based on the agreement 

they signed with HCR, and that the credits “primarily came from bond interest paid 

by Schwab.”  This was a false statement. 

28. On April 23, 2016, Drake emailed Ms. A and the third assistant a 

lengthy and false explanation of the management fees and “credits” in an apparent 

attempt to resolve the issue, insisting that the Clients need not worry about the tax 

consequences of the credits because they were paid using tax-free bonds.  These 

again were false statements. 

29. On April 25, 2016, Drake sent the third assistant a fabricated HCR 

Investment Advisory Agreement, supposedly dated September 8, 2009, that provided 

for “net” fees of between 0.15% and 0.20%.  The document’s metadata shows that it 

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COMPLAINT 9  

 

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was created the same day Drake sent it to the third assistant, and not on or around 

September 8, 2009.  

30. Also on April 25, 2016, Drake sent Ms. A and the third assistant false 

and misleading documents that purported to illustrate a contractual arrangement 

between HCR and Schwab through which Schwab agreed to pay fee credits to the 

Clients.   

31. On April 27, 2016, Drake sent the third assistant a lengthy, false 

explanation about Schwab’s purported payment of the fee credits, and explained that 

Drake personally verified the credits each quarter. 

32. On May 9, 2016, Drake sent Ms. A’s accountant an email in which he 

purported to attach “the quarterly review produced by Schwab that summarizes the 

1.00% fee, the net credits, and the resulting net account fee to the [Clients].”  The 

report was fabricated.  At the bottom of the email, Drake included a fabricated email 

purportedly from Schwab in order to make it appear that he was simply forwarding a 

report sent to him by the brokerage firm.   

33. In mid-May 2016, Drake falsely represented to Ms. A’s accountant over 

the telephone that the Clients’ fee credits were paid out of interest earned on bonds.   

34. On May 31, 2016, Drake emailed Ms. A, the accountant, and the third 

assistant two fabricated letters, ostensibly on Schwab’s letterhead, concerning the 

“credits” and their tax implications.  The first letter, dated October 1, 2009, was a 

purported agreement between HCR and Schwab that purported to provide that the 

Clients would be charged net fees of between 0.15% and 0.20% by HCR.  No such 

agreement existed.  The second fabricated letter, dated May 27, 2016, stated that 

Schwab would work to limit the Clients’ tax liability from the credits.   

D. Drake’s Use of a False Persona to Perpetuate the Deception 

35. In early June 2016, Ms. A asked Drake to provide a contact person at 

Schwab who could explain the fee credits.  She expressed frustration that she and her 

assistants and accountant were still unable to understand the credits after so much 

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time, and that she wanted a clear explanation of everything immediately.  In response, 

Drake created a false persona named “Ron Stenson” whom he held out as an 

employee of “Charles Schwab Advisor Services” who could help explain the fee-

credit system.  He then created a misleading “Ron Stenson” email address, 

[email protected], from which he sent Ms. A, the third assistant, and the 

accountant a number of false and misleading emails and attachments, including 

fabricated documents bearing a “Charles Schwab Advisory Services” logo.  At times, 

Drake participated in email communications with them as both Ron Stenson and 

himself, using a personal email address when emailing as himself, and using the 

[email protected] address when emailing as Ron Stenson.  Drake sent more 

than a dozen “Ron Stenson” emails to Ms. A and her representatives in June 2016.    

36. Drake also licensed a telephone number from an Internet telephone 

provider, which he gave to Ms. A and her representatives as a number to use to call 

Ron Stenson, and for which he set up a voicemail box to receive calls.  Drake then 

connected Ms. A’s accountant with a confederate who posed as Ron Stenson in two 

or three telephone calls with the accountant and purported to corroborate Drake’s 

explanation of the fees and credits.  

E. Drake’s Confession to Ms. A 

37. Toward the end of June 2016, Ms. A came to believe that Drake had 

been lying to her about the management fees for years.  Ms. A contacted Schwab, 

prompting Schwab to contact HCR about Drake.       

38. On July 4, 2016, Drake sent Ms. A an email in which he confessed to 

lying about the management fees in order to keep the Clients’ business.  He admitted 

there was no “credit” system that reduced the Clients’ fees, and that they had paid 

higher fees than they were told.  He also confessed to “sending false information” and 

“involving another person to confirm the false story.”   

39. In the same email, Drake pleaded with Ms. A to help him keep his 

securities license by asking her to lie to Schwab about the source of the fabricated 

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COMPLAINT 11  

 

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documents.  Drake told her that he might be able to keep working as an adviser if Ms. 

A would tell Schwab that someone else had sent her the documents.  Drake also 

warned Ms. A that escalating his misconduct with the brokerage firm could result in 

bad publicity for Mr. A.  Ms. A refused to lie for Drake.   

40. HCR terminated Drake on July 8, 2016. 

F. Drake’s Scienter and the Materiality of his False Statements 

41.   During all relevant times, Drake acted with scienter.  Drake knowingly 

or recklessly provided false information to Ms. A about the fees the Clients were 

being charged, knowingly or recklessly created and sent her fabricated documents, 

and knowingly or recklessly created a false persona to communicate with Ms. A.  

Upon discovery of his deception, Drake admitted to Ms. A that he deceived her to 

avoid losing her as a client.  

42. In addition, Drake failed to exercise reasonable care by providing the 

Clients materially false information about their management fees, and using false 

documentation and a false persona to conceal the true fees from the Clients. 

43. Drake’s fraudulent acts were material.  The fees charged by an 

investment adviser are important to investment adviser clients, and the difference 

between a fee of 1% and a fee of 0.15% to 0.20% is a material difference. 

G. Drake’s Role as an Investment Adviser 

44. During all relevant times, HCR was registered as an investment adviser 

with the SEC, and Drake was associated with HCR. 

45. While associated with HCR, Drake managed his clients’ securities 

accounts on a discretionary basis, including the Clients’ accounts.  He acted as the 

sole representative of HCR when advising the Clients about their accounts; the 

Clients looked exclusively to Drake to manage those accounts; and, pursuant to the 

discretionary authority that the Clients had granted, Drake personally managed the 

Clients’ investments in those accounts throughout their relationship.  Drake received 

compensation in connection with those services, starting with a salary from HCR plus 

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between 40% and 50% of the management fees generated by his clients.  After March 

2013, he received 60% of the management fees paid by these and his other clients.  

Accordingly, Drake was an investment adviser. 

46. In committing the acts alleged herein, Drake acted within the course and 

scope of his employment with HCR.  Drake was solely responsible for managing 

HCR’s relationship with the Clients from the time the Clients became HCR’s clients 

until the Clients ended their relationship with Drake and HCR in June 2016.  In 

committing the violations alleged in this Complaint, Drake acted for himself and for 

the benefit of HCR. 

47. As an investment adviser, Drake owed his clients a fiduciary duty and 

was prohibited from making untrue statements of material fact or from omitting to 

state material facts necessary to make his statements not misleading.  Drake violated 

these obligations by committing the acts alleged in this Complaint. 

48. Alternatively, Drake aided and abetted HCR’s violations of its fiduciary 

duties to the Clients.  HCR, acting through Drake, knowingly or recklessly violated 

Sections 206(1) and (2) of the Advisers Act, 15 U.S.C. §§ 80b-6(1) & 80b-6(2).  

Drake knew of or recklessly disregarded the wrong and his role in furthering it and 

substantially assisted HCR’s violation.  

FIRST CLAIM FOR RELIEF 

Fraud by an Investment Adviser 

Violations of Sections 206(1) and 206(2) of the Advisers Act 

49. The SEC realleges and incorporates by reference paragraphs 1 through 

48 above. 

50. By managing the Clients’ securities accounts on a discretionary basis in 

return for compensation and otherwise performing the acts alleged in this Complaint, 

Drake acted as an investment adviser. 

51. By engaging in the conduct described above, Drake, directly or 

indirectly, by use of the mails or means and instrumentalities of interstate commerce: 

Case 2:17-cv-06204   Document 1   Filed 08/22/17   Page 12 of 15   Page ID #:12



 

COMPLAINT 13  

 

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(a) with scienter, employed devices, schemes or artifices to defraud clients or 

prospective clients; and (b) engaged in transactions, practices, or courses of business 

which operated as a fraud or deceit upon clients or prospective clients. 

52. Specifically, among other things, Drake knowingly, recklessly and 

negligently lied to the Clients and their representatives about the amount the Clients 

were paying in management fees, provided false and misleading information about 

those fees, fabricated and sent false documents, created a false persona to support his 

deception, and enlisted a confederate to assist in deceiving the Clients.   

53. By engaging in the conduct described above, Drake has violated, and 

unless enjoined, will continue to violate, Sections 206(1) and (2) of the Advisers Act, 

15 U.S.C. §§ 80b-6(1) & 80b-6(2). 

SECOND CLAIM FOR RELIEF 

Aiding and Abetting Fraud by an Investment Adviser 

Violations of Sections 206(1) and 206(2) of the Advisers Act 

54. The SEC realleges and incorporates by reference paragraphs 1 through 

48 above. 

55. HCR is a registered investment adviser. 

56. Drake committed the acts alleged above during the course and scope of 

his employment with HCR. 

57. Through the acts of Drake alleged above, HCR violated Sections 206(1) 

and 206(2) of the Advisers Act, 15 U.S.C. § 80b-6(1) and (2).  Specifically, by use of 

the mails or means or instrumentalities of interstate commerce, HCR, directly or 

indirectly, (a) with scienter, employed devices, schemes or artifices to defraud clients, 

or (b) engaged in transactions, practices or courses of business which operated as a 

fraud or deceit upon clients. 

58. Drake knew of or recklessly disregarded the wrongful acts and knew of 

or recklessly disregarded his own role in furthering the wrong.   

59. Drake knowingly provided substantial assistance to HCR in its violations 

Case 2:17-cv-06204   Document 1   Filed 08/22/17   Page 13 of 15   Page ID #:13



 

COMPLAINT 14  

 

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of Section 206(1) and 206(2) of the Advisers Act, 15 U.S.C. § 80b-6(1) and (2). 

60. By reason of the actions alleged in this Complaint, pursuant to Sections 

209(d) and (f) of the Advisers Act, 15 U.S.C. § 80b-9(d) and (f), Drake aided and 

abetted, and, unless enjoined, will continue to aid and abet, violations of Sections 

206(1) and 206(2) of the Advisers Act, 15 U.S.C. § 80b-6(2). 

PRAYER FOR RELIEF 

WHEREFORE, the SEC respectfully requests that the Court: 

I. 

Issue findings of fact and conclusions of law that Drake committed the alleged 

violations. 

II. 

Issue judgments, in forms consistent with Rule 65(d) of the Federal Rules of 

Civil Procedure, permanently enjoining Drake, and his officers, agents, servants, 

employees and attorneys, and those persons in active concert or participation with 

any of them, who receive actual notice of the judgment by personal service or 

otherwise, and each of them, from violating, or, in the alternative, from aiding and 

abetting any violation of, Sections 206(1) and (2) of the Advisers Act, 15 U.S.C. §§ 

80b-6(1) & 80b-6(2).  

III. 

Order Drake to disgorge all funds received from his illegal conduct, together 

with prejudgment interest thereon. 

IV. 

Order Drake to pay civil penalties under Section 209(e)(1) of the Advisers Act,  

15 U.S.C. § 80b-9(e)(1). 

V. 

Retain jurisdiction of this action in accordance with the principles of equity and 

the Federal Rules of Civil Procedure in order to implement and carry out the terms of 

all orders and decrees that may be entered, or to entertain any suitable application or 

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COMPLAINT 15  

 

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motion for additional relief within the jurisdiction of this Court. 

VI. 

Grant such other and further relief as this Court may determine to be just and 

necessary. 

Dated:  August 22, 2017  

 /s/ Kristin S. Escalante   
Kristin S. Escalante 
Attorney for Plaintiff 
Securities and Exchange Commission 
 

 
 

Case 2:17-cv-06204   Document 1   Filed 08/22/17   Page 15 of 15   Page ID #:15



Complaints and Other Initiating Documents 

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Notice of Electronic Filing

The following transaction was entered by Escalante, Kristin on 8/22/2017 at 10:37 AM PDT and filed on 
8/22/2017 

Docket Text:
COMPLAINT No Fee Required - US Government, filed by Plaintiff Securities and 
Exchange Commission. (Attorney Kristin S Escalante added to party Securities and 
Exchange Commission(pty:pla))(Escalante, Kristin)

2:17-cv-06204 Notice has been electronically mailed to: 

Kristin S Escalante     [email protected], [email protected], [email protected], [email protected] 

2:17-cv-06204 Notice has been delivered by First Class U. S. Mail or by other means BY THE 
FILER to : 

The following document(s) are associated with this transaction:

2:17-cv-06204 Securities and Exchange Commission v. Drake

Case Name: Securities and Exchange Commission v. Drake
Case Number: 2:17-cv-06204
Filer: Securities and Exchange Commission
Document Number: 1

Document description:Main Document 
Original filename:J:\ENF\LA-04737\LITIGATION FILES\DRAFTS\PLEADINGS & SETTLEMENTS 
- DRAFTS\Drake Complaint - FINAL FINAL (FINAL).pdf
Electronic document Stamp:
[STAMP cacdStamp_ID=1020290914 [Date=8/22/2017] [FileNumber=24085144-0
] [3a3b2a965ba4141c64eaeacc2dd504f63347c5c82176c554e46c0a16c7e03330fd6
32155062482792f9dc0e79c89aac9c54e8079220f086ce2be1aab5eac0fea]]

Page 1 of 1CM/ECF - California Central District

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