The one-time founder of a U.S. financial services startup is being charged with fraud in connection with a scheme that he allegedly used to divert more than US$150 million.
In an indictment that was unsealed in a New York court, Bradley Heppner — the founder of Beneficient Company Group LP, which helps investors cash out of illiquid alternative assets — was charged with securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud and falsifying records.
According to the indictment, U.S. authorities allege that Heppner created a fictitious US$141-million debt that Beneficient purportedly owed to a shell company he controlled, Highland Consolidated Limited Partnership (HCLP). After gaining control of another financial firm, GWG Holdings Inc., installing himself as chair, and packing the board with friends, it’s alleged that he induced GWG to make investments in Beneficient to help pay off that debt.
The indictment alleged that between 2018 and 2021, Heppner made false and misleading statements to members of GWG’s board about HCLP, claiming that it was independent and that he had no role at that company.
“And when GWG authorized payments to satisfy what it believed were arm’s length debts owed to a third-party lender, those funds flowed through multiple corporate entities and ultimately to Heppner’s personal accounts,” authorities alleged, adding that Beneficient received at least US$300 million from GWG, and that more than US$150 million of that money flowed through to Heppner.
To help hide the scheme, authorities also alleged that Heppner made false and misleading statements and prepared false documents to deceive Beneficient’s auditors; and that he falsified other documents in an attempt to thwart regulators, after the U.S. Securities and Exchange Commission (SEC) began an investigation into GWG and its dealings with Beneficient.
Ultimately, GWG went bankrupt, leaving retail investors with at least US$1 billion in losses.
In a statement, Beneficent said that it “parted ways with Mr. Heppner earlier this year promptly after the company learned of clear and credible evidence of his fraud on the company and others.”
The company said that it’s cooperating with the government, and that it will “continue to vigorously pursue its own potential claims against Mr. Heppner and entities associated with him on behalf of its shareholders.”
“As alleged, Heppner abused his role as a public company executive to loot the company and to funnel money into his own pockets,” said Jay Clayton, U.S. attorney for the Southern District of New York, in a release.
“When executives like Heppner lie and cheat to enrich themselves at the expense of everyday investors, they corrupt the integrity of our public markets,” he added.
The allegations have not been proven, and Heppner is presumed to be innocent.