David Low, founder and CEO of Hawaii Capital Management LLC, was arrested Tuesday on criminal charges, accused of defrauding five former clients of more than $300,000.
Each of the five counts is punishable by up to 10 years in jail. Low is scheduled to be arraigned Monday in Circuit Court.
Low was being held at Oahu Community Correctional Center and had not posted $110,000 bail as of Wednesday afternoon.
"He violated the trust of those clients by diverting their investments for personal use," said Colleen Chun, administrator of the Insurance Fraud Division of the state Department of Commerce and Consumer Affairs.
The state also cited Low for unlawfully using money from other investors to buy securities for himself and pay personal expenses.
Tung Chan, commissioner of securities for the department, issued a cease-and-desist order Wednesday against Low and his company, Hawaii Capital Management, citing violations of state securities laws.
Low promoted himself as an investment expert and as "Hawaii’s Fittest CEO" on his company website, hawaiicapitalmanagement.com, after being featured in an October 2007 Hawaii Business Magazine article, headlined "Top Male and Female Fittest CEO," the department said in a news release.
The state said that between February 2010 and April 2012, Low solicited three investors to buy securities through Hawaii Capital Management. He told his clients that their money would be invested in an annuity, Roth IRA, or "pooled" investment for future use, the department said. The clients gave Low and his company a combined $257,626, but none of their money was ever invested, the state said.
Instead, Low used the money for his own investments and for personal payments to Mercedes Benz, Audi Hawaii and the City and County of Honolulu for registration of a Ferrari, according to the department’s complaint. Low also used money to buy groceries and pay off credit cards debts, as well as for dining and entertainment, gym membership and rent.
The order claims that Low and his firm used "deceptive schemes and devices to conceal the fraud such as forging documents, using one investor’s money to pay a return to another investor, and issuing false financial statements of fictitious accounts and account balances."
The department said Low was not registered to transact securities in Hawaii and that the securities he sold to the three investors were also unregistered, violating state anti-fraud provisions.
The order seeks total penalties of $200,000 in addition to restitution for the investors and a permanent injunction against Low’s transacting securities.
The state is asking anyone who has been solicited or has done business with Low or Hawaii Capital Management to contact the state Securities Enforcement Branch at 586-2740 on Oahu or seb@dcca.hawaii.gov.
The company’s website says Low had more than 23 years of experience in the investment industry before forming Hawaii Capital Management. The site said that Low previous worked for Lehman Brothers and Bear Stearns.
The website, RipoffReport.com, posted a consumer report in September 2010, claiming that Low took money from an elderly woman promising a big return, but lost all her money after placing the funds in risky investments.
"She is now totally broke thanks to David Low," said the post by a man who referred to himself as Robert from Pearl City and didn’t give his last name.
"Stay far away from him and warn your friends and friend’s parents as he is an unethical predator on the elderly."
