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On Aug. 1, the Securities and Exchange Commission filed a complaint in federal court alleging that serious financial crimes were perpetrated by the now-defunct investment firm Sisu Capital, LLC, and by its owner/CEO Timothy Overturf, of Arcata, and his father, Hansueli “Hans” Overturf.

Specifically, the complaint says that between 2017 and 2021, the Overturfs breached their legal duties as financial advisors by lying to their clients and making “unauthorized and unsuitable” trades on their behalf. The commission is seeking injunctions, penalties and “disgorgement of ill-gotten gains,” meaning they want the Overturfs to fork over the money they allegedly earned illegally, plus interest and fines.

[Note: Sisu Capital, LLC, has no relation to the local cannabis company Sisu Extracts. I stand corrected. The Sisu parent company shared at least one executive with Sisu Extracts. John Figueiredo is listed as the cofounder and former CEO of both companies on various online business directories, and he was a registered financial advisor with Sisu Capital from 2015-2016. You can see him tell his own story in this YouTube video. By way of disclosure, I knew John when he was a kid, nearly two decades ago, when I worked for his parents at Figueiredo’s Video in Arcata.]

[UPDATE, Aug. 21: Reached via text message, John Figueiredo sent the following statement:

I worked briefly at SISU Capital part time (10 hrs/month) from 2015-2016 while I was a software engineer in San Francisco, aiming to learn about investing. I ultimately left because the company’s risk reward profile didn’t align with my values. SISU Extracts, now employee-owned, serves as a vital financial pillar for our community, collaborating with numerous local farms to support our local economy. It’s important to note that no person currently working at SISU Extracts has ever had any connection with SISU Capital.]

Timothy Overturf purchased the Arcata Theatre Lounge in 2019 with business partner Joseph Ostini. His dad, Hans, was accused in 2004 of bilking an elderly couple with dementia out of $730,000 by convincing them to invest in a posh resort called Redwood Parks Lodge, which was never built. After the elderly couple died, Hans agreed to pay their family $420,000. The charges were dropped, though Hans was later twice suspended by the State of California from acting as an investment advisor.

The SEC complaint alleges that he did so anyway. It says Hans Overturf, who now lives in Switzerland, referred many of his own investment advisory clients to his son’s new company, Sisu, which Timothy Overturf founded in 2013 at the age of 18. 

The complaint further alleges that Hans advised Sisu clients, made investment decisions and trades with their accounts while using his limited power of attorney and sent emails with a signature block that identified him as “Trader” and “Head of Business Development, Sisu Holding Company, Inc.” He also failed to inform clients of his suspension, according to the complaint.

“Timothy Overturf knew Hans Overturf was suspended and prohibited from providing advisory services to Sisu clients during his suspension,” the SEC complaint says. “Nevertheless, Timothy Overturf allowed his father to communicate directly with Sisu clients and make investment decisions for Sisu managed accounts.”

Sisu Capital, LLC, targeted rich clients who invested large sums. In the less than six years that the company was registered as an investment advisor with the State of California, the complaint says, “Sisu offered investment advisory and portfolio management services to approximately 42 high-net-worth clients and reported assets under management up to approximately $51.7 million.”

Before shutting down in 2021, Sisu and Timothy Overturf received at least $2 million in payments from clients while acting contrary to their interests, the complaint alleges. It also says that from 2017 to 2019, the year Timothy Overturf and his business partner purchased the Arcata Theatre, the younger Overturf took home roughly $858,000 in owner draws and loans from the company.

Reached by phone on Friday afternoon, Timothy Overturf said he hadn’t yet read a copy of the SEC filing, “so I don’t know what that specific complaint is about.”

I read to him from the document’s summary of accusations.

“I can’t comment on that,” he said. “It’s just such a complicated accusation that getting into it with you is not going to answer any questions.” He declined to comment further.

Here are a few specifics about how Timothy and his father allegedly misled their clients: In 2018, the broker-dealer that held Sisu clients’ funds terminated its relationship with the company. (The SEC complaint doesn’t say why.) Afterwards, the commission alleges, Hans Overturf made misleading statements to clients about the split, telling them that Sisu was moving their accounts to a new brokerage firm because it was more flexible and had lower fees.

Hans also allegedly convinced clients to allow him access to their successor brokerage accounts, after which he and Timothy proceeded to make trades that were contrary to their clients’ instructions.

“For example,” the complaint says, “in October 2019, and again in March 2021, Timothy Overturf purchased thinly-traded stock [meaning stocks that can’t be easily sold or exchanged for cash without a big drop in price] of a particular bank (“the Bank”) for five Sisu accounts, but in each instance the transactions were contrary to the clients’ instructions.

“In one instance,” the complaint continues, “Timothy Overturf purchased 2,300 additional shares of the Bank’s stock between March 2020 and March 2021 for the account of a Sisu client after that client had specifically and repeatedly instructed Hans Overturf, verbally and in writing, to sell his holdings in the Bank’s stock and that he did not want to invest in the stock of any bank. Timothy Overturf was aware of the client’s instruction to Hans Overturf.”

The SEC alleges that Timothy and Hans Overturf had a secret plan to amass enough shares in this bank, among themselves and their clients, to propose partnership ideas with the bank, “including leveraging the Bank’s charter to accept crypto assets and to offer Bank customers Sisu’s advisory services.”

Another accusation: Hans recommended to Sisu clients, and purchased on their behalf, “unsuitable, complex financial instruments,” including something called an “inverse short-term volatility futures product,” which is designed to be traded quickly but which Sisu held onto, against their clients’ express instructions, for months or, in some cases, more than a year. 

All the while, Sisu was charging clients an annual fee equal to two percent of the assets they’d entrusted to the company, plus a 20 percent performance fee. 

The SEC accuses Sisu and the Overturfs of violating several sections of the Investment Advisers Act of 1940 and asks the court, among other things, to make Sisu and Timothy Overturf give up “all ill-gotten gains or unjust enrichment derived from the activities set forth in this complaint,” plus interest and civil penalties.

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DOCUMENT: SEC v. Sisu Capital, LLC, Timothy Overturf and Hansueli Overturf