SEC Obtains Final Judgments Against New York Investment Adviser and Others for Defrauding Investors in a Multi-Million Dollar Ponzi Scheme

A final judgment has been entered by the U.S. District Court for the Eastern District of New York against Brian Callahan, an investment adviser from New York, his brother-in-law Adam Manson, and Manson’s two entities. This judgment is related to their involvement in a Ponzi scheme that was halted by the SEC’s emergency action on March 5, 2012.

According to the SEC’s amended complaint, Callahan raised over $90 million from at least 45 investors for his five offshore funds between 2005 and January 2012. Callahan managed the investment decisions for these funds through his two investment advisory entities and received inflated management fees. He misused investor assets to pay off certain investors seeking redemptions and for personal expenses. Additionally, he diverted funds from the funds to Manson’s private real estate project on Long Island. Manson and his entities, Distinctive Investments, LLC, and Distinctive Ventures, LLC, played a role in helping Callahan conceal the scheme by creating false promissory notes and audit confirmations.

Callahan, Manson, Distinctive Investments, and Distinctive Ventures, without admitting or denying the SEC’s allegations, consented to the entry of a final judgment. This judgment permanently prohibits them from violating the antifraud provisions of the federal securities laws. On March 9, 2013, Callahan’s investment advisory entities and offshore funds were also enjoined from violating antifraud provisions. A receiver appointed by the court in the SEC’s action, along with criminal authorities in a parallel criminal action, collected and distributed over $51 million to the affected investors.

In 2014, both Callahan and Manson pleaded guilty to securities fraud charges in the criminal action titled United States v. Brian R. Callahan and Adam Manson, Crim. No. 13-453-GRB (E.D.N.Y.). Callahan was sentenced to 12 years in prison followed by three years of supervised release and ordered to pay restitution exceeding $67 million in 2017. In October 2022, Manson was sentenced to two years in prison, one year of supervised release, and he forfeited certain monies.

The SEC’s litigation was conducted by Dean M. Conway, Lisa Deitch, Ashley Sprague, and Holly Yoshinari, under the supervision of Stacy Bogert and James Connor.