Brian Raymond Callahan, a money manager from Old Westbury, is...

Brian Raymond Callahan, a money manager from Old Westbury, is accused of defrauding 24 or more investors of $74.9 million. Credit: iStock

The Securities and Exchange Commission sued a money manager from Old Westbury, accusing him of defrauding 24 or more investors of $74.9 million, including $270,000 invested by a California teacher.

Brian Raymond Callahan told investors their money would be invested in hedge funds, including some run by Morgan Stanley, according to the lawsuit, which was filed Monday in U.S. District Court in Brooklyn.

Instead, Callahan allegedly used the money to pay back other investors and for investments in Distinctive Ventures, a Great Neck beach resort and residence project of his brother-in-law that was facing foreclosure. In return he received unsecured, illiquid promissory notes, the suit says.

He also allegedly used the investors' money for a $3.35-million down payment on a co-op unit in the project.

Callahan's lawyer said Tuesday his client expects to make investors whole. "Mr. Callahan is hopeful that the assets of the partnership will be sufficient to repay investors in full," said Robert Knuts of Park & Jensen in Manhattan.

Callahan, who raised money from 2005 to 2012, didn't tell his clients he was barred in 2009 from associating with any member of the Financial Industry Regulatory Authority, the brokerage industry's self-regulatory group, according to the SEC. FINRA's action effectively banned him from the securities industry.

The District Court has granted an order freezing Callahan's assets. He operated five offshore funds through his investment advisory firms, which include Horizon Global Advisors.

He told investors their money would end up in New York hedge funds Kinetics Institutional Partners and Millennium USA, in addition to the Morgan Stanley funds, the SEC said. Some of the assets of Callahan's funds were invested in those funds, the agency said.

Callahan said his liquid assets at the end of last year totaled $65.1 million when the actual figure was $6.46 million, the SEC said.

The case was assigned to U.S. District Judge Arthur Spatt in Central Islip.

-- With Bloomberg News

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