Florida businessman accused of duping KC investors to support ‘lavish’ spending

Federal officials have filed charges against Florida-based 1st Global Capital and its former CEO, accusing them of defrauding thousands of investors, including about 160 in the Kansas City area.

A Securities and Exchange Commission complaint unsealed Tuesday alleges that Carl Ruderman diverted money that 1st Global Capital was supposed to be investing, instead using it to support Ruderman’s other businesses and his “lavish personal spending.”

“We allege that 1st Global’s business model was a sham because instead of using investor funds as promised, 1st Global and Ruderman diverted significant funds, including to Ruderman himself for his personal benefit,” Eric Bustillo, director of the SEC’s Miami regional office, said in a statement released by the agency. “The SEC’s investigation effectively stopped 1st Global’s offering and prevented further harm to investors and retirement funds.”

Ruderman’s company is unrelated to Dallas-based 1st Global Capital Corp.

Ruderman resigned in July after 1st Global Capital declared bankruptcy. Attempts to reach him at his home in Florida were unsuccessful, and an attorney for the Ruderman Family Trust didn’t respond to a phone message Wednesday.

The company blamed the bankruptcy on investigations by the SEC and the U.S. attorney’s office in southern Florida.

The SEC says Ruderman duped 3,400 investors out of at least $287 million since 2014. A federal judge has granted the government’s request to temporarily freeze the assets of Ruderman and six of his other companies as the SEC seeks to recover “allegedly ill-gotten gains” plus interest from them.

A Sept. 7 hearing is set in south Florida to decide whether the asset freeze will continue throughout the case against Ruderman.

Beverly Durant, one of the Kansas City area residents who invested in 1st Global Capital, said she hoped the government could recover the money, but feared much of it would go to pay legal costs.

“If I could get all my money, that would be wonderful,” Durant said. “(My investment was) really not big at all compared to some other people, but it’s all I had.”

The SEC alleges that Durant and other 1st Global Capital investors were “given bogus account statements and were falsely told that (1st Global Capital) had an independent auditor and that its secured loans, typically for small amounts, had low default rates.”

It also alleges that 1st Global was selling unregistered securities through a network of brokers, some of whom were barred from selling securities because of past indiscretions. The brokers were paid commissions in exchange for selling investors memos saying 1st Global Capital was indebted to them.

Durant and the other Kansas City area investors were brought to 1st Global by Matthew Walker, a financial adviser and CEO of Overland Park-based Pinnacle Plus companies.

Reached by phone Wednesday, Walker asked to set up an interview next week to talk about the charges against Ruderman and 1st Global Capital.

“I would like to talk about it,” Walker said. “Obviously I have to talk to my attorneys on that.”

Durant said she trusted Walker after getting a referral for a friend and working with his company to buy an Allianz annuity.

But she said she found it hard to believe that Walker had been duped by Ruderman, too, and knew nothing of the investment scheme alleged by the SEC.

She said Walker told her 1st Global was essentially a sure thing and there was no way she could lose her principal investment.

“If somebody had approached me off the street to do this 1st Global Capital, of course I wouldn’t have done it,” Durant said. “But I believed what he told me. ... All along I told him, ‘This is the only money I have. We can’t lose this money.’ ”

This story was originally published August 29, 2018 at 4:24 PM.