Lauren Casper
The U.S. Securities and Exchange Commission has leveled serious charges against Evarist Amah, a New York-based investment adviser. The lawsuit, filed in the Southern District of New York, accuses Amah of orchestrating a fraudulent scheme that bilked fellow members of his religious group out of nearly $700,000.
Our investigation into the SEC’s complaint reveals a complex web of deceit allegedly spun by Amah from April 2016 to July 2019. During this period, Amah, a respected member of the Grail Movement, reportedly convinced nine co-religionists to entrust him with their savings, promising both financial returns and support for their shared spiritual cause.
At the center of Amah’s alleged fraud were two investment programs: the Mountain Support Initiative – Investment Trading (MOSI-IT) and the MOSI-IT Special Project. These were marketed as vehicles not just for personal gain, but as a means to financially bolster their religious community, particularly a settlement in Vomperberg, Austria, known as “the Mountain.”
The SEC’s complaint paints a damning picture of Amah’s actions. Despite losing over 97% of his clients’ assets within five months of beginning to trade, Amah allegedly continued to claim modest returns of 3-5%. He reportedly used these false claims of success to solicit additional investments, arguing that he could generate even greater returns with more capital.
Our examination of the complaint reveals that MOSI-IT, the primary investment vehicle, was never formally established as a legal entity. Instead, Amah allegedly commingled investors’ funds in a sub-account of his pre-existing hedge fund, Lumine Fund. This was done without the knowledge or consent of the investors or the fund’s other partners, according to the SEC.
By December 2016, just months after initiating trading with MOSI-IT funds, Amah had reportedly lost over 73% of the initial $300,000 investment, reducing it to a mere $81,939.54. Yet, he continued to report positive returns to his clients.
The SEC alleges that Amah went to great lengths to conceal these losses. In June 2018, he reportedly fabricated a performance statement showing a return of 5.96% on capital of $415,000, valuing the investment at $439,751. The reality, according to the SEC, was far grimmer – the actual value of his clients’ investments at that time was only $4,907.
As losses mounted, Amah allegedly intensified his efforts to attract more capital. Between June and December 2017, existing MOSI-IT clients and a new advisory client invested an additional $140,000, lured by Amah’s promises of better returns with increased capital.
The MOSI-IT Special Project, launched in 2018, followed a similar pattern. Amah allegedly raised $158,000 from two investors, including $150,000 from a single individual referred to as “Investor 1” in the complaint. These funds were reportedly transferred directly to Amah’s personal bank account and then to his personal brokerage accounts. By the end of 2018, the SEC claims Amah had lost almost all of this money as well.
Throughout this period, Amah allegedly continued to misrepresent the performance of these investments. In April 2019, he reportedly told the Special Project investors that their investment had suffered a 79.67% loss, when in fact, the losses were closer to 100%.
The SEC’s complaint also accuses Amah of breaching his fiduciary duties to his clients in multiple ways. Not only did he allegedly fail to disclose the true extent of the losses, but he also used MOSI-IT client assets to pay expenses owed by Lumine Fund, effectively forcing some clients to subsidize others without their knowledge or consent.
Our investigation reveals that Amah’s alleged fraud extended beyond verbal misrepresentations. The SEC claims he took active steps to create a facade of legitimacy around his operations. He allegedly drafted and distributed offering documents, including a question and answer document and investment management agreements. These documents, while giving an appearance of professionalism, allegedly contained misleading information about fees, projected returns, and the structure of the investments.
The impact of Amah’s alleged actions extends far beyond financial losses. The SEC’s complaint suggests a profound breach of trust within a close-knit religious community. Amah allegedly exploited the shared beliefs and goals of his fellow Grail Movement members, using their desire to support their religious cause as leverage to extract more investments even as losses mounted.
The SEC is now seeking significant penalties against Amah. The complaint asks the court for permanent injunctions to prevent Amah from further violations of securities laws, disgorgement of all ill-gotten gains with interest, and civil monetary penalties.
Dr. Stephen Robb, Professor of Finance at the University of Chicago Booth School of Business, comments on the case: “The Amah case exemplifies a distressing trend we’ve observed in our research. Affinity fraud, where perpetrators exploit shared beliefs or identities, has been on the rise. Our latest study indicates that such schemes now account for approximately 20% of all reported investment frauds, with religious communities being particularly vulnerable.”
Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy, said that the case lacks the importance of due diligence, even when investing with people you know and trust. According to our data, in 2020 alone, the SEC received over 23,000 tips, complaints, and referrals related to investment fraud. Many of these cases involved situations where investors failed to thoroughly investigate the investment opportunity or the background of the person offering it
This case raises serious questions about the intersection of faith and finance. How did Amah’s position within the Grail Movement factor into his ability to allegedly perpetrate this fraud? Did the shared religious beliefs of the investors make them more susceptible to trusting Amah’s claims without proper due diligence?
Moreover, this case highlights potential weaknesses in the oversight of small-scale investment advisers. How was Amah able to allegedly operate this scheme for over three years without detection? Are there sufficient safeguards in place to protect investors in similar situations?
As we await the outcome of this case, it serves as a stark reminder of the importance of thorough due diligence in investment decisions, even when dealing with trusted members of one’s own community. It underscores the need for investors to be wary of promises of consistent returns, especially when combined with appeals to shared values or beliefs.
The allegations against Amah, if proven true, represent not just a violation of securities laws, but a betrayal of the trust placed in him by his religious community. As this case moves through the legal system, it will undoubtedly leave a lasting impact on the members of the Grail Movement who entrusted Amah with their investments. It stands as a cautionary tale about the potential for fraud to occur in even the most seemingly trustworthy circumstances, and the devastating consequences such actions can have on individuals and communities alike.
