Texas-based investment manager Khalid Parekh has been accused of making false statements and illegally investing $18.5 million of client funds into cryptocurrency platforms. The U.S. Securities and Exchange Commission (SEC) detailed the allegations in a recent statement.
Breach of Sharia Principles
Parekh and his consulting firm Fair Invest marketed investment products purportedly aligned with Sharia principles, which prohibit earning interest on debt. Clients were promised a 4% annual dividend from long-term investments in stocks, ETFs, mutual funds, and commodities. However, the funds were instead funneled into two crypto-lending platforms for short-term loans.
The SEC revealed that Fair Invest failed to disclose its earnings from crypto-lending activities, as well as a significant conflict of interest: Parekh was a shareholder in one of the platforms.
Scale of Misconduct
Between August 2021 and August 2022, 373 investors from 40 U.S. states participated in Fair Invest’s scheme, contributing a total of $18.5 million. Many of the affected investors were from the Muslim community, who were specifically targeted due to the Sharia-compliant marketing.
Consequences for Fair Invest and Parekh
- Revocation of License: Fair Invest has been stripped of its investment advisor license.
- Repayment to Clients: The firm was ordered to return all funds to investors, along with the promised 4% dividends.
- Fine: A $100,000 penalty was imposed on the company and Parekh.
- Cease-and-Desist: Both parties were banned from further involvement in investment activities.
Although neither Parekh nor Fair Invest admitted or denied the SEC’s findings, they agreed to settle under the regulator’s terms.
Notably, the SEC recently disclosed a record-breaking enforcement collection of $8.2 billion over the past year.
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