The man at the center of one of the biggest alleged fraud schemes in Broadway history was charged Monday with stealing or diverting at least $8.5 million from his brokerage customers while working as a stockbroker.
On Monday, investigators for the Financial Industry Regulatory Authority, a securities regulator, concluded a three-year investigation into Mark Hotton's work as a stockbroker, and in a complaint filed with a disciplinary panel charged him with carrying out numerous schemes to bilk customers of millions of dollars since at least 2006.
Mr. Hotton, 46 years old, is being held in federal custody on separate criminal charges that he duped the producers of "Rebecca: The Musical" into believing he'd secured millions of dollars in financing for the production. The Finra allegations aren't related to the alleged "Rebecca" fraud.
The Finra complaint alleges Mr. Hotton stole at least $5.9 million directly from his brokerage customers and caused at least $2.6 million to be wired from the brokerage accounts of his customers at Oppenheimer & Co. to businesses and individuals with whom he was affiliated.
Mr. Hotton's criminal attorney, Gerald Shargel, said he wasn't representing Mr. Hotton in the Finra case and declined to comment. An attorney who has represented him in other Finra matters didn't immediately respond to a request for comment.
Mr. Hotton, who lives on Long Island, also caused millions of dollars in additional customer losses by trading excessively, trading without authorization and recommending "patently unsuitable" transactions, according to the complaint.
Federal prosecutors last month charged Mr. Hotton with constructing an elaborate ruse to hoodwink the producers of "Rebecca" into believing he had secured $4.5 million in financing from four fictitious investors. One of the characters was an Australian named Paul Abrams, who was said to have suddenly died from malaria contracted on an African safari, prosecutors said in court papers.
The Wall Street Journal in October reported that Mr. Hotton was under investigation by Finra, a nonprofit that regulates stockbrokers and issues the Series 7 license required to become a stockbroker.
Mr. Hotton obtained his Series 7 license in 1993 and over the past four years racked up an unusually high number of 12 customer complaints and arbitration cases, according to Finra records. The Series 7 license is active only when a broker is affiliated with the firm. Mr. Hotton's license became inactive in May when he left his most recent firm.
Oppenheimer, which employed Mr. Hotton from 2005 to 2009, said: "Investigations were conducted by both Oppenheimer and a securities regulator and no evidence of misconduct was uncovered. Any claims involving Mr. Hotton's activities came to Oppenheimer's attention after he left Oppenheimer."
Finra disciplinary actions can include permanently barring a broker from the securities industry. The complaint seeks sanctions including forcing Mr. Hotton to make restitution and surrender "any and all ill-gotten gains."
According to the Finra complaint, Mr. Hotton in some cases persuaded customers "to 'invest' in securities that simply did not exist. At other times, he persuaded customers to invest in what appeared to be legitimate businesses, but then used the customers' funds to pay back prior 'investors' or to line his own pocket."
Write to Jennifer Maloney at jennifer.maloney@wsj.com
A version of this article appeared November 6, 2012, on page A21 in the U.S. edition of The Wall Street Journal, with the headline: New Claims Against 'Rebecca' Suspect.
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