Litigation Releases (James Burleson)

U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26178 / November 21, 2024

Securities and Exchange Commission v. James Burleson

, No. 24-civ-08246 (N.D. Cal. filed Nov. 21, 2024)

SEC Charges Petaluma, California-Based Investment Adviser for Conducting Fraudulent "Cherry-Picking" Scheme

The Securities and Exchange Commission today charged James Burleson, the majority owner and principal of Burleson & Company, LLC, a formerly SEC-registered investment adviser based in Petaluma, California, with defrauding clients by conducting a cherry-picking scheme.

According to the SEC's complaint, from August 2020 to October 2022, Burleson conducted his fraud by making risky options trades through his firm's block trading account, which allowed him to execute trades for multiple clients and then subsequently allocate them to individual client accounts. As alleged by the SEC, Burleson waited to see whether his options trades were profitable before deciding whether to allocate the trades to his own personal account or those of his clients. The complaint alleges that Burleson disproportionately allocated profitable options trades to his personal account and unprofitable trades to his clients. According to the complaint, Burleson's received over $1.8 million in first-day profits and his clients suffered over $2.8 million in first-day losses, as a result of Burleson's cherry-picking.

The SEC's complaint, filed in the U.S. District Court for the Northern District of California, charges Burleson with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940.

The SEC's investigation was conducted by Matthew Montgomery and supervised by Robert Conrrad, with assistance from Rachita Gullapalli and Nicolas Lopez in the Division of Economic and Risk Analysis. The litigation will be led by Alec Johnson and supervised by Douglas Miller.