The Securities and Exchange Commission has filed fraud charges against two attorneys it says stole money from small-business owners seeking commercial loans.

Jay Mac Rust and Christopher Brenner collected $13.8 million while acting as escrow agents between their clients and a loan company called Atlantic Rim Funding, the SEC said in a complaint filed Friday in Manhattan federal court.

Rust and Brenner assured clients that their deposits of 10% of the loan amount applied for would be used only to purchase liquid, government-backed securities that Atlantic would subsequently leverage to obtain their loans, the SEC said. When it became obvious to the Rust and Brenner that Atlantic had no intention of obtaining the loans, they continued to deceive clients and to collect money from them, the SEC said.

Rust siphoned $662,000 in client funds and Brenner $595,000 to pay themselves and others, and used the remaining money to gamble on risky securities derivatives, the complaint says. They opened multiple securities accounts at broker-dealers to make the trades and avoided scrutiny by claiming that the money was their own cash rather than client assets, the SEC said.

The SEC seeks permanent injunctions and disgorgement of ill-gotten gains, as well as interest and penalties. "We allege that these attorneys betrayed the trust of their clients by luring them with promises of small business loans that never materialized," Andrew Calamari, director of the SEC's New York regional office, said in a press release. "They continued to recruit new escrow clients to repay earlier clients and did everything but keep client money safe as they represented they would."

Rust's attorney, Ben Florey James, and Brenner's lawyer, Adrienne Toon, were not available to comment Friday.

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