Texas Investment Manager Misappropriates $18.5 Million in Client Funds for Crypto Lending

A Texas investment manager, Khalid Parekh, has been accused of making false statements and unlawfully investing $18.5 million of client funds into cryptocurrencies, according to a statement from the U.S. Securities and Exchange Commission (SEC).

The report states that Parekh and his consulting firm, Fair Invest, offered investments adhering to Sharia principles, which prohibit earning from debt.

Clients were promised 4% annual dividends from long-term investments in stocks, ETF, mutual funds, and commodities. 

Authorities discovered that instead, the funds were directed to two crypto lending platforms, where they were used for short-term loans. The firm failed to disclose that its affiliate received a portion of the loan income, creating a conflict of interest, and that Parekh was a shareholder in one of the platforms. 

According to the Commission, from August 2021 to August 2022, 373 investors across 40 U.S. states used the service. Parekh collected a total of $18.5 million, primarily from members of the U.S. Muslim community.  

During the investigation, Fair Invest was stripped of its investment advisor license and compelled to return clients’ funds along with the promised 4%. The firm and its head were ordered to cease operations and pay a $100,000 fine.

The accused neither admitted nor denied the SEC’s findings, agreeing to a settlement under the terms set by the authorities.

In the past year, the Commission has secured a record $8.2 billion through enforcement actions.