Funds from settlement in investor-attorney dispute can be diverted to pay SEC fine in fraud case

By William Sassani | Jul 30, 2018

SAN DIEGO – The U.S. District Court for the Southern District of California recently denied part of a request by the Securities and Exchange Commission (SEC) to have money held in a settlement of an attorney dispute related to an SEC investment fraud case diverted to pay the $2.5 million settlement of the fraud case and pay SEC fines.

SAN DIEGO – The U.S. District Court for the Southern District of California recently denied part of a request by the Securities and Exchange Commission (SEC) to have money held in a settlement of an attorney dispute related to an SEC investment fraud case diverted to pay the $2.5 million settlement of the fraud case and pay SEC fines. 

U.S. District Judge Cynthia Bashnat in her 24-page July 18 ruling, noted that Jacob Cooper had diverted almost $2 million in investor money “for his own personal benefit, thereby conferring an unfair advantage on himself” and defrauding investors. Cooper had used the money for his salary and was ordered to pay the $2.5 million to those who invested in his company.  

In a related case, the SEC ruled that Cooper, through his company Total Wealth Management, had defrauded investors. This decision came with a fine to the SEC of $584,354 along with the order to pay over $2.5 million to “benefit the investors harmed by his unlawful conduct.” 

However, after the judgment in the SEC case, Cooper sued the law firm that had represented him during the proceeding, Jacko Law Group, for malpractice. He argued that he had “suffered harm” by the law group in their representation of him to the SEC. The two parties came to an initial settlement, with the court holding  the money in case Cooper and Jacko Law Group could not agree on how those funds should be divided. The SEC then argued that the money from that settlement should be used to pay Cooper’s fines. 

In her ruling, Bashnat wrote that the SEC could not divert the money from the Cooper/Jacko settlement for the $2.5 million judgment. However, she did say that the SEC could use part of that settlement to pay the $584,354 fine that Cooper owed the SEC. 

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