Eric Steven Smith (CRD #2894648, Waterford, Michigan)

October 21, 2024 – Smith appealed an SEC decision to the US Court of Appeals for the Sixth Circuit. Smith was barred from association with any FINRA member in all capacities and ordered to pay $130,000, plus prejudgment interest, in restitution to investors. The restitution and prejudgment interest are to be paid jointly and severally with his member firm. Considering the bar, additional sanctions were assessed but were not imposed. The SEC sustained the findings and sanctions imposed by the NAC. The sanctions were based on the findings that Smith willfully violated Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and FINRA Rules 2020 and 2010 by fraudulently misrepresenting and omitting 18 Disciplinary and Other FINRA Actions December 2024 material facts in connection with the sale of securities. The findings stated that Smith engaged in acts of fraud over an extended period involving investors who lost the entirety of their investments. Smith solicited a minimum of 15 people to invest in a bridge loan note offering; of those, four people invested $130,000 in the offering. Smith intentionally failed to disclose the critical fact that his member firm owed prior investors hundreds of thousands of dollars that it could not repay. Smith was desperate to raise funds for the firm, which was also struggling to pay its employees and remain viable. In addition, Smith knew or was reckless in not knowing that his representations about the firm’s financial prospects were unfounded and would persuade investors to purchase the offering. Smith continued to solicit investors when it was obvious that his claims in the offering materials touting a special purpose bank and the purportedly pending engagements with a trust company and the city of Jacksonville, Florida, were false. Later, one of the investors requested a refund from Smith of his investment after he had not received documents related to his investment. Smith told the investor that he had no present ability to refund his money and attempted to assuage the investor’s concerns by claiming without support that the firm’s assets far exceed its total debt. Smith’s fraudulent omission and misrepresentations resulted not only in the potential for monetary gain, but $130,000 in actual gain for Smith and the firm for his sales to the investors. The findings also stated that Smith actively engaged in a multitude of activities as a principal and representative despite his lack of registration. Smith knew that he was required to register as a principal to manage the firm’s day-to-day securities business. Smith acknowledged in the firm’s new member application form (Form NMA) that he was exempt from registration only if he was not actively engaged in the firm’s management. However, Smith was active in most every aspect of firm management. Smith also acted as a representative without oversight when he directly, and through other firm representatives, solicited firm customers to invest in the firm’s debt offerings. These solicitations resulted in some firm customers investing in firm offerings and provided the firm with much-needed cash infusions. Thus, Smith had the potential for monetary gain from these investments that served to keep his business afloat. The sanctions, except for the bar, are not in effect pending review. (FINRA Case #2015043646501) If you have suffered losses as a result of Eric Steven Smith's act and/or actions, we would like to hear from you. We are currently investigating claims on behalf of clients who have suffered significant losses in their portfolios that are managed by Eric Steven Smith. The Schwartz Law Firm represents investors in claims against financial advisors and their firms. If you have questions about your potential claim or need assistance from an investment fraud lawyer, please contact us at 866-618-0545 or email Matthew Schwartz directly at mschwartz@tslfirm.com.