Fund manager from Philly gets 9-year prison term for orchestrating $100 million fraud

Brenda Smith, the Philadelphia investment fund manager who orchestrated a $100 million securities fraud scheme, has been sentenced to more than nine years in prison, according to federal prosecutors in Newark, N.J.

Smith, 61, must also pay $47.2 million in restitution. She had pleaded guilty last September to a securities fraud count.

Prosecutors said Smith operated the scheme from February 2016 through August 2019, using her investment fund, Broad Reach Capital. They say she lied to investors about the fund’s assets and performance.

Smith, who lived in a penthouse apartment in Center City when she was arrested in 2019, collected more than $100 million in investments from 40 investors, prosecutors said. But instead of investing the money, as promised, she diverted millions for other purposes, including paying other investors.

Smith claimed annual returns of over 33 percent in 2017 and positive monthly returns in 2018 when in reality, the value of Broad Reach Capital’s bank and brokerage accounts fell from late 2016 through June 2019.

Smith gave investors monthly statements purporting to show that their investments were protected and making money. Smith also claimed that she had personally invested in Broad Reach Capital when she hadn’t and gave a fictitious statement to one investor, prosecutors said.

Although she took in $100 million, the value of her Broad Reach holdings never exceeded $32 million. That’s because she transferred tens of millions of dollars from Broad Reach to other entities. She invested more than $10 million in mineral mining operations and spent about $2 million for American Express credit card bills, the government said.

When investors wanted to cash in investments, Smith used other investors’ funds to repay them.

As of last September, a receiver in the case had about $7 million in cash and was trying to recover more from early investors. The receiver is also selling Smith’s assets, including valuable rugs from her former apartment, her Infiniti car, four properties she owned in her home state of Louisiana, and more than 30,000 shares in the Lyft ridesharing company. Such a stake in Lyft was worth more than $1.5 million last fall.

Smith’s biggest investor was Surefire Dividend Capital, a Montreal investment firm that reported losing $46 million. The firm sued Smith in September 2019, as did the U.S. Securities and Exchange Commission’s Philadelphia regional office.

Smith received a 109-month sentence on Wednesday. She will also have to serve three years of supervised release once she’s freed.