The SEC charged former GunnAllen financial advisor Frank Bluestein with fraud, alleging that he lured elderly investors into a $250 million Ponzi scheme conducted through E-M Management Co. According to the complaint, over a five-year period, Bluestein raised approximately $74 million from more than 800 investors for the E-M scam. The SEC filed charges against Detroit-area resident Edward May, and his firm E-M Management, back in November of 2007.

In August of 2007, Bluestein was number four on our “America’s Top 100 Independent Advisors” list, which ranks advisors based on their assets under management. Bluestein then managed $1 billion in assets. Bluestein’s CRD reveals that in October 2007, 10 customer disputes were logged against him totaling approximately $1.57 million in alleged damages. (Read here for more on Bluestein’s fall from grace.) Bluestein was fired by his employer, broker/dealer GunnAllen Financial, that same month for selling unregistered securities. Bluestein then moved to an office down the street and began working under the name “Frank Julian,” as a member of the “research team” at a company called Freedom Road, which claimed to be in the business of “stock selection and market education,” according to a Detroit Fox News affiliate. (Read here for more on Bluestein’s Freedom Road operation.)

According to the SEC press release, Bluestein allegedly acted as the single largest salesperson in the E-M Ponzi scheme, and lured many investors in through investment seminars. The SEC’s lawsuit against May and E-M charged him with defrauding $250 million from as many as 1,200 investors between 1998 and July 2007. May was selling shares of limited liability companies, which he claimed had received revenues from phony telecommunication contracts with Las Vegas hotels, casinos and resorts.

According to the SEC’s complaint, during Bluestein’s seminars, he would start by discussing generic financial planning topics and other investment products, but afterwards, during informal conversation, would encourage attendees who had already invested in his E-M offerings to talk about them. According to the release, Bluestein would ask them if they had “received their Ed May checks?” or “How do you like those Ed Mays?” in order to attract the interest of other potential investors attending the seminars.

The SEC’s complaint also alleges that Bluestein misrepresented the investments as low-risk and claimed that he had conducted adequate due diligence when, in fact, he did little to investigate the legitimacy of the E-M offerings even when confronted with serious red flags. Bluestein also misled investors by failing to disclose that he received at least $2.4 million in commissions from May and E-M in addition to the $1.4 million in disclosed compensation he received from investor funds.