James Lee Accused of Misleading Investors

James Y. Lee, of La Jolla, California, defrauded investors by charging clients fees based on false performance, concealing from them that they actually lost money, and misleading them by promising to share in the realized losses and the risks of his options trading strategy, according to a complaint filed by the Securities and Exchange Commission (SEC).

Lee solicited investors in multiple states to open online brokerage accounts, including margin accounts, for purposes of allowing him to trade stock options on their behalf and share in any profits, according to the SEC.

Lee’s clients funded individual accounts opened in their names by mailing checks or making wire or other transfers to these online brokers, according to the complaint. Lee exercised near complete control over client accounts, determining what options should be traded and had access to client accounts through use of client user name and password information, according to the SEC.

Lee charged high fees and even defrauded certain clients by charging fees based on overstated investment results, according to the complaint filed by the SEC. Lee charged fees to three of his clients based on false account performance for February 2011 and concealed from the clients that they had actually incurred net realized losses that month, such that no fees were due, according to the complaint. By allegedly exaggerating gains and minimizing losses, Lee deceived his clients about the true performance of their investments and his associated fees.

Lee misled clients about their investment risks, according to the SEC. Lee did not discuss with investors the risks of options trading or the risks associated with his margin trading strategy, according to the complaint. Instead of making the appropriate risk disclosures, Lee promised investors that he would split losses with them “50/50” and repay them out of his own funds as long as the investors shared half of their realized gains with Lee, according to the complaint.

The Peiffer Wolf securities attorneys often represent investors who lose money as a result of Ponzi schemes, investment fraud, or stockbroker misconduct. They are currently investigating the possibility of assisting victims with the recovery of their losses. They take most cases of this type on a contingency fee basis and advance the case costs, and only get paid for their fees and costs out of money they recover for their clients.

Investors who believe they lost money as a result of investment fraud or misconduct may contact the securities lawyers at Peiffer Wolf, Jason Kane or Joe Peiffer, for a free, no-obligation evaluation of their recovery options, at 585-310-5140.

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