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Life Insurance Investment Funds Traced to Supporting Financial Adviser’s Extravagant Lifestyle

March 7, 2011

Photo by Jeff Kubina. Some rights reserved.

In a complaint filed on March 3, the SEC alleged that former UBS Financial Services adviser Steven T. Kobayashi defrauded his customers out of almost $3.3 million between 2006 and 2009. The Commission’s related litigation release from that same day states that after establishing Life Settlement Partners LLC (LSP), a fund ostensibly created to invest in life insurance policies, Kobayashi then “used LSP’s bank accounts as his personal piggy bank” in order to “support his extravagant lifestyle.”

Kobayashi is reported to have spent $1.4 million of LSP funds on certain choicer aspects of this “extravagant lifestyle,” including prostitutes, expensive luxury cars, and what the SEC calls “enormous” gambling debts.

The SEC complaint states that LSP was run as a legitimate business for a short while, with the purchase of 25 or so life settlement policies; but soon, Kobayashi began to “methodically steal” funds, and by February 2006 he was funneling money directly into his own personal account.  When LSP investors eventually began to demand returns on their investments, Kobayashi obtained almost $2 million from “a handful of his loyal UBS customers,” which he used to pay off LSP investors.

Though Kobayashi has neither confirmed nor denied these allegations, he has agreed to settle; the “amount of ill-gotten gains and monetary penalties” for which he is responsible are yet to be determined.

 

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