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The Securities and Exchange Commission today charged a Tallahassee-based investment adviser firm and its two former principals with defrauding investors, most of whom were retired NFL players who had joined a class-action lawsuit against the league claiming they suffered brain injuries as a result of concussions.

The SEC charged Cambridge Capital Group Advisors, LLC (f/k/a Cambridge Capital Advisors, LLC); Cambridge’s president Phillip Timothy Howard, a Florida attorney who represented the retired players in the class action lawsuit; and Don Warner Reinhard, a former registered investment adviser previously barred by the SEC, with defrauding 20 investors in two proprietary hedge funds operating out of Howard’s law offices. According to the SEC’s complaint, the defendants advertised that the funds would invest in a variety of instruments, but unbeknownst to investors, in fact invested almost exclusively in settlement advance loans to more than 70 of Howard’s NFL class-action clients.

As alleged, the defendants represented that Reinhard was an “extremely successful investment manager,” but failed to mention that he had served jail time for bankruptcy and tax fraud, and had been barred by the SEC from working for any investment adviser firm. The SEC further alleges that Howard defrauded investors by borrowing $612,000 in undisclosed personal mortgage loans from the funds, which he never repaid, and that Howard and Reinhard used investor funds to pay themselves fabricated “broker fees” on settlement advance loans to Howard’s legal clients. Howard and Reinhard allegedly raised $4 million from the retired NFL players, about half of whom rolled over their NFL 401(k) accounts to the hedge funds.

The SEC’s complaint filed in federal district court in the Northern District of Florida charges Howard, Reinhard, and Cambridge with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 206(4)-8 thereunder, and Howard and Cambridge with also violating Section 207 of the Advisers Act. The SEC seeks permanent injunctions, disgorgement of allegedly ill-gotten gains, prejudgment interest, and financial penalties.

The SEC’s investigation was conducted by David P. Staubitz and Mark Dee, under the supervision of Chedly C. Dumornay and Glenn S. Gordon of the SEC’s Miami Regional Office. The litigation will be led by Amie R. Berlin, under the supervision of Andrew O. Schiff.