By Ann C. Logue
It’s not terribly difficult to research people in the investment profession, thanks to such resources as FINRA BrokerCheck and the NFA’s BASIC database. Along with a Google or Lexis/Nexis search, and you can find out a ton of information about people. These resources won’t protect you from those who have not yet run afoul of the law, but they are perfect starting points.
David W. Schamens joined the investment business in 1983. In 1988, he was cited for making an unauthorized and money-losing trade in a customer account; in 1992, he was barred from the industry. Most people disappear from BrokerCheck ten years after they stop registering with FINRA, unless their report contains a disclosure, such as being barred from the securities industry. Schamens then started a data analytics firm for the trading industry, perfectly legal because it did not involve selling securities or advising others.
For whatever reason, selling data wasn’t doing it for Schamens. In February of 2019, the SEC alleges that he began selling investments in what he said was a pooled investment vehicle that would invest in a group of pre-selected stocks that would then be traded automatically using a proprietary algorithm. That alone would be a violation of the 1992 agreement with FINRA. I suppose that if you are going to knowingly break the law, you may as well do it right. Apparently, Schamens used the funds entrusted to him for personal expenses and to repay previous investors. Then, he forged monthly statements showing 80 percent annualized gains. He forged auditor statements attesting to that, too. In total, the SEC says that investors lost $6.8 billion.
Then, the story gets weird. Schamens was also involved with a PAC that supported former President Donald Trump. After his arrest, he told reporters that former Senator Hillary Clinton was behind the charges. She was seeing revenge after Schamens testified against her in secret Grand Jury that he supposedly gave in 1997. ProPublica reported that the PAC committed multiple reporting violations.
In other words, investors had plenty of clues to be careful, but they apparently invested with Schamens anyway. Basic due diligence will unfurl red flags; take heed.
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