MORRISTOWN, N.J. (AP) — A New Jersey-based financial adviser who operated a scheme that defrauded investors out of $9.8 million has been sentenced to 15 years in prison.
Acting State Attorney General John Hoffman says Maxwell Smith III must serve five years of the sentence imposed Monday before he becomes eligible for parole. Smith also must pay nearly $7.9 million in restitution, which represents the amount taken from investors less amounts he returned as purported interest.
The 73-year-old Fair Haven resident pleaded guilty in November 2009 to money laundering. His state prison sentence will run concurrently with a seven-year federal prison term he received last month for mail fraud.
Authorities say Smith created a sham investment fund, promising his mostly elderly clients tax-free returns of up to 9 percent annually. But instead of investing the funds, Smith used the money for personal expenses, including gambling and international travel.
"These elderly clients trusted Smith as their financial adviser, and he rewarded their trust by stealing their life savings," Hoffman said.
The New Jersey Bureau of Securities conducted a separate regulatory investigation of Smith. He entered into an administrative consent order with the Bureau of Securities that provides for restitution payments and permanently bars him from working in the securities industry in New Jersey.
Smith had been a registered agent with numerous broker-dealer firms registered to sell investment products in New Jersey since 1974. Smith worked for a firm based in Tinton Falls from January 2005 to April 2009, when the firm fired him and reported his alleged fraudulent conduct to securities regulators.