UNITED STATES SECURITIES AND EXCHANGE COMMISSION

The Securities and Exchange Commission ("Commission") deems it appropriate and in the public interest that public administrative proceedings be, and hereby are, instituted pursuant to Section 203(f) of the Investment Advisers Act of 1940 ("Advisers Act") against Brian Raymond Callahan ("Callahan" or "Respondent"). The Commission finds that in 2012, the Commission filed a civil action against Callahan for engaging in a long-running fraudulent Ponzi scheme in which investors were misled about the nature of their investments and the misuse and misappropriation of their money. On April 29, 2014, the United States District Court for the Eastern District of New York accepted Callahan's guilty plea to one count of securities fraud (15 U.S.C. §§ 78j(b) and 78(ff)) and one count of wire fraud (18 U.S.C. § 1343) in United States v. Brian R. Callahan and Adam J. Manson, No. 1:13-CR-453. By judgment entered on September 29, 2017, Callahan was sentenced to a prison term of 144 months followed by three years of supervised release and ordered to make restitution in the amount of $67,615,407. In connection with that plea, Callahan admitted that he defrauded investors by making materially false and misleading statements concerning the use of investment funds and omitting to disclose that certain funds would be used in connection with a real estate project. On May 12, 2023 a final judgment was entered by consent against Callahan, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933 ("Securities Act"), Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and Sections 206(1), (2) and (4) of the Advisers Act and Rule 206(4)-8 thereunder, in the civil action entitled Securities and Exchange Commission v. Brian Raymond Callahan, et al., Civil Action Number 1:12-CV-1065, in the United States District Court for the Eastern District of New York. The Commission's complaint alleged that from at least 2005 to 2012, Callahan raised tens of millions of dollars from at least 45 investors for at least five offshore pooled investment funds that Callahan operated. Callahan managed and made the investment decisions for the five investment funds and received inflated management fees. Callahan's solicitation of investors involved material misrepresentations about the use of their money and liquidity of their investments. Callahan misused a portion of investor assets to pay other investors seeking redemptions, diverted investor assets to a real estate project on Long Island, and misused fund assets for his personal benefit.

Order

Bar (Permanent)

association with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or NRSRO

Indefinite

5/19/2023

ATTEMPT AND CONSPIRACY TO COMMIT WIRE FRAUD

Dismissed

FRAUD WITH IDENTIFICATION DOCUMENTS/AGGREVATED IDENTITY THEFT

Dismissed

CONSPIRACY TO COMMIT SECURITIES FRAUD

Pled guilty

MANIPULATIVE AND DECEPTIVE DEVICES

Dismissed

FRAUD BY WIRE

Pled guilty

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

SEC LITIGATION RELEASE 22275, MARCH 6, 2012: ON MARCH 5, 2012, THE SECURITIES AND EXCHANGE COMMISSION (SEC) FILED CHARGES AGAINST A NEW YORK INVESTMENT ADVISER FOR DEFRAUDING INVESTORS IN FIVE OFFSHORE FUNDS AND USING SOME OF THEIR MONEY TO BUY HIMSELF A MULTI-MILLION DOLLAR BEACH RESORT PROPERTY ON LONG ISLAND. BRIAN RAYMOND CALLAHAN RAISED MORE THAN $74 MILLION FROM AT LEAST TWO DOZEN INVESTORS SINCE 2005, PROMISING THEM THEIR MONEY WOULD BE INVESTED IN LIQUID ASSETS, THE SEC ALLEGED IN A COMPLAINT FILED IN FEDERAL COURT. INSTEAD, CALLAHAN DIVERTED INVESTORS' MONEY TO A RELATIVE'S BEACH RESORT AND RESIDENCES PROJECT, WHICH WAS FACING FORECLOSURE, AND IN RETURN RECEIVED UNSECURED, ILLIQUID PROMISSORY NOTES, ACCORDING TO THE COMPLAINT. CALLAHAN ALSO USED INVESTORS' FUNDS TO PAY OTHER INVESTORS AND TO MAKE A DOWN PAYMENT ON THE $3.35 MILLION UNIT HE PURCHASED AT HIS RELATIVE'S REAL ESTATE PROJECT, THE SEC ALLEGED. CALLAHAN OPERATED THE FIVE FUNDS THROUGH HIS INVESTMENT ADVISORY FIRMS, AND USED THE PROMISSORY NOTES TO HIDE HIS MISUSE OF INVESTOR FUNDS. THE PROMISSORY NOTES OVERSTATED THE AMOUNT OF MONEY DIVERTED TO THE REAL ESTATE PROJECT. FOR INSTANCE, IN 2011, CALLAHAN RECEIVED $14.5 MILLION IN PROMISSORY NOTES IN EXCHANGE FOR ONLY $3.3 MILLION HE PROVIDED TO HIS RELATIVE. THE INFLATED PROMISSORY NOTES ALLOWED CALLAHAN TO OVERSTATE THE AMOUNT OF ASSETS HE WAS MANAGING, AND INFLATE HIS MANAGEMENT FEES BY 800% OR MORE. CALLAHAN REFUSED TO TESTIFY IN THE SEC'S INVESTIGATION AND RECENTLY INFORMED INVESTORS ABOUT THE INVESTIGATION, BUT GAVE FALSE ASSURANCES THAT NO LAWS HAD BEEN BROKEN. CALLAHAN ALSO MISLED INVESTORS BY NOT DISCLOSING THAT IN 2009, THE FINANCIAL REGULATORY INDUSTRY AUTHORITY (FINRA) BARRED HIM FROM ASSOCIATING WITH ANY FINRA MEMBER. THE SEC CHARGES CALLAHAN AND HIS ADVISORY FIRMS WITH VIOLATING FEDERAL ANTIFRAUD LAWS, SPECIFICALLY SECTIONS 17(A)(1), (2) AND (3) OF THE SECURITIES ACT OF 1933, SECTION 10(B) OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULES 10B-5(A), (B) AND (C) THEREUNDER, AND SECTIONS 206(1), 206(2) AND 206(4) OF THE INVESTMENT ADVISERS ACT OF 1940 AND RULE 206(4)-8 THEREUNDER. SEC LITIGATION RELEASE 22366, JUNE 1, 2012: ON MAY 31, 2012, THE SEC AMENDED ITS COMPLAINT AGAINST CALLAHAN, AND CALLAHAN'S INVESTMENT ADVISORY FIRMS IN THE SEC'S EMERGENCY ACTION FILED ON MARCH 5, 2012 THAT HALTED AN ONGOING $90 MILLION PONZI SCHEME. THE SEC'S AMENDED COMPLAINT ADDITIONALLY CHARGES CALLAHAN'S FIVE OFFSHORE FUNDS WITH FRAUD AND CALLAHAN'S RELATIVE AND TWO OF HIS ENTITIES, WITH AIDING AND ABETTING CALLAHAN'S SCHEME. THE AMENDED COMPLAINT ALSO NAMES ANOTHER RELATIVE AS A RELIEF DEFENDANT. CALLAHAN'S FIVE OFFSHORE FUNDS HAVE AGREED TO BE PLACED UNDER THE CONTROL OF THE RECEIVER THAT THE COURT APPOINTED IN AN ORDER ISSUED ON MARCH 27, 2012.

Judgment Rendered

Disgorgement

$38,956,065.00

Monetary Penalty other than Fines

Injunction

FINRA

NASD RULES 2110, 3030, 3040, 3110 AND 8210: RESPONDENT BRIAN R. CALLAHAN FORGED THE NAMES OF INDIVIDUALS ON SOLICITOR'S DISCLOSURE STATEMENTS (SDS) AND BY CREATING A FALSE SDS, CALLAHAN CAUSED HIS MEMBER FIRM TO VIOLATE THE REQUIREMENTS OF THE INVESTMENT ADVISORS ACT OF 1940. CALLAHAN SENT AN EMAIL TO AN INDIVIDUAL OF HIS MEMBER FIRM'S OPERATIONS DEPARTMENT THAT FORWARDED WHAT PURPORTED TO BE AN EMAIL HE HAD RECEIVED FROM AN EMPLOYEE OF A CUSTOMER. CALLAHAN'S PURPORTED EMAIL BORE ALL THE EARMARKS OF A LEGITIMATE EMAIL, INCLUDING SIGNATURE LINES, DISCLAIMERS, AND THE CUSTOMER'S LOGO. CALLAHAN FABRICATED THIS EMAIL AT HIS WORKSTATION IN ORDER TO CONVEY THE FORGED SDS TO THE OPERATIONS DEPARTMENT FOR PROCESSING. BY SENDING THIS EMAIL, CALLAHAN CAUSED HIS MEMBER FIRM'S RECORDS TO BE INACCURATE AND THEREBY PREVENTED IT FROM MEETING ITS OBLIGATION TO PRESERVE FOR A PERIOD OF NOT LESS THAN SIX YEARS, THE FIRST TWO YEARS IN AN EASILY ACCESSIBLE PLACE, ALL RECORDS REQUIRED TO BE MADE PURSUANT TO THE REQUIREMENTS OF SEC RULE 17A-4(B)(4), WHICH INCLUDES ORIGINALS OF ALL COMMUNICATIONS RECEIVED AND COPIES OF ALL COMMUNICATIONS SENT (AND ANY APPROVALS THEREOF) BY THE MEMBER, BROKER OR DEALER (INCLUDING INTER-OFFICE MEMORANDA AND COMMUNICATIONS) RELATING TO ITS BUSINESS AS SUCH, INCLUDING ALL COMMUNICATIONS WHICH ARE SUBJECT TO RULES OF A SELF-REGULATORY ORGANIZATION OF WHICH THE MEMBER, BROKER OR DEALER IS A MEMBER REGARDING COMMUNICATIONS WITH THE PUBLIC. CALLAHAN ENGAGED IN OUTSIDE BUSINESS ACTIVITIES, AND FAILED TO PROVIDE PROMPT WRITTEN NOTICE OF THESE ACTIVITIES TO HIS MEMBER FIRM. CALLAHAN ENGAGED IN PRIVATE SECURITIES TRANSACTIONS WITHOUT PROMPT WRITTEN NOTICE TO, OR APPROVAL FROM, HIS MEMBER FIRM. CALLAHAN FAILED TO RESPOND TO A FINRA REQUEST FOR DOCUMENTATION AND INFORMATION.

Decision & Order of Offer of Settlement

Bar (Permanent)

All Capacities

Indefinite

6/2/2009

WITHOUT ADMITTING OR DENYING THE ALLEGATIONS, CALLAHAN CONSENTED TO THE DESCRIBED SANCTION AND TO THE ENTRY OF FINDINGS; THEREFORE, HE IS BARRED FROM ASSOCIATION WITH ANY FINRA MEMBER IN ANY CAPACITY.