SEC Accuses Fair Invest of Using Client Funds for Cryptocurrency Investments
Date: 2024-11-27 Author: Gabriel Deangelo Categories: BUSINESS
Run by Khalid Parekh, Fair Invest offered a Wealth Building Account (WBA) financial product that purported to comply with Islamic principles that exclude the accrual and receipt of interest. From August 2021 to August 2022, 373 people from 40 states purchased the product, investing a total of $18.5 million. The company promised returns of up to 4% per annum, claiming that investments were directed into stocks, exchange-traded funds, commodities, and other low-risk instruments.
However, an SEC investigation found that instead of the stated long-term investments, the company placed clients' money on crypto lending platforms without disclosing this fact. Parekh also owned a stake in one of the platforms, which created a conflict of interest that investors were not informed about. In addition, Fair Invest claimed that WBA accounts were insured by the Securities Investor Protection Corporation (SIPC), which was not true.
The SEC also accused the company of deceiving customers by claiming that their investments would be individually managed based on their financial goals and needs. In reality, the funds were used without regard for the promised terms, and some of the profits from cryptocurrency transactions were pocketed.
As part of the SEC case, Khalid Parekh agreed to a number of settlements to avoid further charges. Although he did not admit or deny the allegations, investors were given their principal amount back, along with promised dividends. In addition, Parekh deregistered from the SEC as an investment adviser and agreed to pay a fine of $100,000.
This is not the first time the SEC has intervened in cases related to crypto investments. The commission had previously filed suit against Galois Capital, which lost half of its clients' assets while storing them on the FTX exchange, which went bankrupt two years ago. Galois eventually settled the case, agreeing to pay $225,000.
