The Fall of Thomas Chadwick: A Cautionary Tale of Financial Misconduct

In the world of finance, trust is paramount. Clients entrust their hard-earned savings to advisors, expecting sound guidance and ethical practices. However, the case of Thomas Chadwick, a disgraced financial advisor from New London, New Hampshire, serves as a stark reminder of the potential for betrayal in this industry. After agreeing to pay over $5 million for unethical investment practices that cost his clients millions, Chadwick has yet to make any restitution, raising serious questions about accountability and the protection of investors.

The Consent Order and Its Implications

In April 2024, Chadwick entered into a consent order following accusations of investor fraud that resulted in losses exceeding $11 million for his predominantly elderly clientele. This order reduced the restitution amount to approximately $4.8 million, with an additional $1 million allocated for state fines and investigation costs. Despite this agreement, court records reveal that Chadwick has made no payments toward the judgment, leading the New Hampshire Secretary of State’s Securities Regulation Bureau to consider him in default.

Brian Linares, a senior staff attorney at the Bureau, emphasized the seriousness of the situation in a recent amended complaint filed in Merrimack Superior Court. “As of the date of this filing, Chadwick has made no payment toward the $5,858,346.71 judgment owed per the Consent Order,” he stated, highlighting the ongoing struggle to hold Chadwick accountable.

The Bureau’s Legal Action

In light of Chadwick’s noncompliance, Secretary of State David Scanlan’s office is pursuing legal action to enforce the consent order. The Bureau has the authority to seek a court-imposed collection process, a necessary step given Chadwick’s claims of having no assets to make payments. A representative from the Bureau explained, “The only way for the bureau to enforce an administrative order is through the Superior Court.” This legal route is essential for ensuring that victims receive the restitution they are owed.

Chadwick’s attorney, Friedrich Moeckel, has expressed opposition to the Bureau’s court intervention, arguing that it could be counterproductive and costly for all parties involved. He contends that amending the complaint effectively restarts the case, prolonging the process without necessarily leading to a resolution.

The Nature of Chadwick’s Misconduct

Chadwick’s misconduct primarily revolved around the promotion of a complex, unsecured debt security known as REML. This investment, which was marketed as a low-risk option for retirees, was anything but secure. In 2019, Chadwick began shifting his clients into REML, despite warnings from its bank, Credit Suisse, that it was a volatile asset unsuitable for those who could not afford to lose their investment.

Many clients reported that Chadwick failed to disclose the risks associated with REML, with several stating they would never have invested had they been aware of the potential for total loss. By March 2020, a significant portion of Chadwick’s clients had invested heavily in REML, with some allocating over 70% of their savings to this risky fund. When the COVID-19 financial crash hit, REML’s value plummeted, leaving clients devastated.

Continued Mismanagement and Regulatory Oversight

Despite the catastrophic losses, Chadwick’s response was alarming. He encouraged clients to reinvest in REML, asserting that the risk of not owning shares was greater than remaining liquidated. This reckless advice further exacerbated the financial ruin faced by his clients.

In 2021, Chadwick severed ties with his original investment firm, Chadwick and D’Amato, and began operating as an unlicensed financial advisor through Fidelity Brokerage Services. However, Fidelity eventually cut ties with him due to suspicious trading activity, which led to the freezing of 27 client accounts. This left many retirees locked out of their own funds, unable to access their savings during a critical time.

Victims Seek Justice

The fallout from Chadwick’s actions has been extensive. A group of former investors has filed a complaint with the federal Financial Industry Regulatory Authority (FINRA) against Fidelity, accusing the firm of ignoring red flags that allowed Chadwick to operate unchecked. Additionally, the state of Vermont has stepped in to provide some relief, compensating 21 of Chadwick’s victims with a total of $339,000 through its Victim Restitution Fund.

Conclusion: A Call for Accountability

The case of Thomas Chadwick underscores the urgent need for stricter regulations and oversight in the financial advisory industry. As victims continue to seek justice and restitution, the legal proceedings against Chadwick serve as a critical reminder of the importance of ethical practices in finance. Investors must remain vigilant, ensuring they are informed and protected against potential misconduct. The hope is that this case will lead to greater accountability and safeguards for those who entrust their financial futures to advisors.