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The Securities and Exchange Commission today announced that Jay Daniel Seinfeld; his firm Traditions Capital Management LLC; a purported charity he founded, the Hospice Patient Aid Program, Inc.; and a social worker he employed have agreed to settle charges arising out of a reckless scheme to exploit terminally ill investors and then profit from their deaths.

The SEC’s complaint alleges that Seinfeld, who was based in New York, hired Texas-based social worker Sara Beth Postma and founded the Hospice Patient Aid Program to gain access to hospices and terminally ill patients throughout Texas. According to the complaint, between 2010 and 2012, Seinfeld and Postma induced over a dozen such patients to provide their personal information and sign transaction documents as purchasers of corporate bonds that would pay out upon their deaths while simultaneously relinquishing most of the bonds’ anticipated proceeds. Using documents supplied by Seinfeld, Postma allegedly led the patients to believe that the Hospice Patient Aid Program would use bond proceeds to assist hospice patients in need of financial assistance; instead, when patient-purchasers died, Seinfeld allegedly redeemed the bonds and split a large majority of the profits – hundreds of thousands of dollars in the aggregate – with other wealthy investors.

The SEC’s Office of Investor Education and Advocacy (OIEA) today issued an Investor Alert encouraging investors to be wary of investments claiming to help charitable causes. In the Alert, OIEA warns that fraudsters may prey on investors’ desire to help others by using charitable causes to draw victims into investment scams.

The SEC’s complaint, which was filed in federal court in Texas, charges Seinfeld, Postma, the Hospice Patient Aid Program, and Traditions Capital Management with violating the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The defendants agreed to the settlement without admitting or denying the charges. In addition to permanent injunctive relief, Seinfeld has agreed to a 3-year officer-and-director bar and to pay $412,750 in disgorgement and prejudgment interest and a $256,287 penalty. Postma has agreed to a 2-year officer-and-director bar and to pay $93,750 in disgorgement and prejudgment interest and a $50,000 penalty. The settlements are subject to court approval. In settlement of an anticipated SEC administrative proceeding, Seinfeld has also offered to consent to securities-industry and other bars, with a right to apply for readmission after three years.

The SEC’s investigation was conducted by Benjamin Brutlag and James Bresnicky, with assistance from Kenneth Donnelly, and was supervised by J. Lee Buck II and Melissa Hodgman. The SEC appreciates the assistance of the Federal Bureau of Investigation and the U.S. Department of Homeland Security – Homeland Security Investigations.