A Canadian couple claims that a White Plains financial adviser lost more than $2.5 million in their retirement portfolio by using a risky investment strategy that was portrayed as low-risk.
Daniel and Juliette Morton of Vancouver, British Columbia, accused Salo Aizenberg and his Downtown Investment Advisory of negligence in a Sept. 17 complaint filed in U.S. District Court, White Plains.
Aizenberg turned their “life works into a financial house of cards guaranteed to topple in the event of market volatility,” the lawsuit states. He “engaged in an unsuitable, speculative investment strategy that defied common sense.”
Aizenberg did not respond directly to a request for his side of the story, but he sent a link to an online profile of Daniel Morton that suggests his client was a more sophisticated investor than his complaint lets on.
Morton graduated in 1995 with a Master’s degree in economics history from the London School of Economics, according to the LinkedIn profile. He has worked as a financial adviser for companies in France, Luxembourg, San Francisco, Singapore, Vancouver and Vietnam. He claims numerous financial and management skills in areas such as corporate finance, acquisitions, valuations and stock options.
Aizenberg founded Maytal Asset Management, operating as Downtown Investment Advisory, in 2013. As of February, his firm had 98 clients and nearly $124 million in assets under management.
New investors must put in at least $1 million to establish an account, according to a required U.S. Securities and Exchange Commission disclosure, and Aizenberg requires full discretionary authority to manage assets according to what he deems to be the clients’ best interest based on their objectives and guidelines.
The Mortons invested with Downtown Investment Advisory in 2017 after Daniel Morton read articles by Aizenberg that were posted on the Seeking Alpha website. Aizenberg, according to the complaint, advocated investing in high yield “junk bonds” and using leverage ”“ borrowing money to buy assets ”“ to boost yield.
“The key premise was that there might be price movement in the bonds,” according to the complaint, “but with no risk of default, you could hold the bond to maturity to get principal and interest back.”
Buying securities with borrowed money typically amplifies gains in the good times but can magnify losses and trigger a margin call in the bad times.
Daniel Morton said he repeatedly asked Aizenberg about the possibility of a margin call ”“ where assets must be sold or more funds deposited to maintain an account balance during heavy trading losses.
Aizenburg allegedly said the risk of a margin call was negligible and “brushed off his concerns stating that he would be in a ‘good position to withstand a massive drawdown.'”
The Mortons were urged to stay the course during the early days of the Covid-19 pandemic, according to the lawsuit, because fears about the virus were overblown, the economy would rebound and their fixed income account would hold up well during a market correction.
The market did recover, the complaint notes, but the strategy had failed to account for how a margin call could decimate the account during a market correction.
In March 2020, Aizenberg allegedly told Daniel Morton that “he still had a huge amount of room in his margin cushion,” and advised him not to lock in losses that he believed would reverse.
On March 21, 2020, Aizenberg “finally agreed that he could and would unwind margin on Monday (March 23), the complaint states, but account custodian Interactive Broker had already begun liquidating the Mortons’ holdings on March 18 because of “violations of margin risk limits.”
The couple claims they lost more than $2.5 million and “the vast majority of their savings.”
The Mortons are demanding more than $2 million in damages and the return of quarterly fees they paid for management of their finances.
The couple is represented by Manhattan attorney Adam J. Weinstein and attorney Courtney Werning of Columbus, Ohio.
