The SEC has banned venture capitalist David Wagner for a Ponzi scheme but it may be the least of his worries: He's currently serving six years behind bars.

The SEC has banned permanently the founder of a venture capital fund who is already serving time in prison for running a Ponzi scheme that conned his own employees.

David Wagner admitted last fall that his firm, Downing Partners, was a fraud that bilked some 30 investors out of at least $8 million (Venture Capital Journal, October 23, 2020).

The Commission’s ban, published in a September 7 settlement order, may be the least of Wagner’s problems. In January, a federal judge in the Southern District of New York sentenced him to six years in prison behind the scheme (RCW, January 14, 2021).

Wagner’s sentencing was the first in a series of bad headlines for exempt reporting advisers this year. In the months after he was sentenced, federal authorities have arrested at least seven other executives in five separate cases involving Reg D companies (RCW, May 26, 2021).

Newly installed SEC chairman Gary Gensler has since made Reg D reform his top priority.

Wagner, 66, and his partners claimed that Downing would focus on start-up health tech companies. The case was unusual in that most of the scheme’s victims were the firm’s staff. Wagner charged “employee-investors” $200,000 each for the privilege of selling Downing shares. It was proof, Wagner and his partners claimed, that staff “had skin in the game,” federal prosecutors said.