SEC Charges Robert J. Mueller of deeproot funds LLC with Operating $58M Ponzi Scheme

Last Updated: August 24, 2021

robert j mueller deeproot funds ponzi scheme

INVESTORS: The Sonn Law Group – a consumer protection law firm with over 30 years of experience representing victims of fraudulent investment schemes – is investigating allegations that Robert J. Mueller has swindled investors out of $58 million through his company deeproot Funds, LLC.

We want to hear from investors who are worried about their investments with Robert J. Mueller of deeproot funds LLC, based in San Antonio Texas. We are committed to gathering the facts and helping you recover as much of your investment as possible.

If you’ve invested with Robert J. Mueller and deeproot funds LLC, call the Sonn Law Group anytime at 844-689-5754 or complete the intake form below to speak with a legal professional from our firm about your options for recovery.

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deeproot funds LLC Ponzi Scheme: Allegations Made in the SEC Complaint

Below is the text from the SEC's complaint regarding Robert J. Mueller of deeproot funds LLC:


COMPLAINT

1. From at least September 2015 to at least February 2021, Robert J. Mueller and deeproot, both investment advisers, defrauded two investment funds they advise and nearly 300 people who invested roughly $58 million in the funds.

2. Mueller and deeproot were investment advisers to two pooled investment funds that Mueller created in 2014, the deeproot 575 Fund, LLC (the “575 Fund”) and the deeproot Growth Runs Deep Fund, LLC (the “AGRD Fund”) (collectively, “the Funds”). Mueller and deeproot persuaded investors, many of whom were retirees, to cash out annuities and individual retirement accounts they held with other investment companies and invest in the Funds. Mueller and deeproot told investors the Funds would invest in life insurance policies and deeproot-related businesses to provide relatively safe returns to investors.

3. For the 575 Fund, investors committed their principal investment for five years and elected to receive either simple annual interest of 7% per year paid out in a lump sum at the end of the five-year term, or 5% simple annual interest paid out in monthly installments for each of five years thus, the “5-7-5" in the fund's name). For the GRD fund, investors committed their principal investment for an undetermined time and were promised that they could receive a potentially larger payout upon the maturity of a life policy investment and based on a complex, first-in, first-out redemption process at an unspecified future point in time.

4. Mueller and deeproot told investors that the 575 Fund would invest “the simple majority of our Fund Assets” in life insurance policies. Though not disclosed until 2019, the 575 Fund purchased interests in life insurance policies indirectly, by investing in the GRD Fund, which itself would invest "the majority of our Fund Assets” in life insurance policies purchased for the Funds by Mueller's other company, Defendant Policy Services. Mueller and deeproot also told investors that the 575 Fund would use "less than fifty percent (50%) of the asset portfolio” to make "capital acquisition[s]" in affiliated businesses, including the Relief Defendants.

5. While Defendants raised more than $58 million from investors in the 575 Fund and the GRD Fund, they commingled the money in deeproot and Policy Services bank accounts and spent less than $10 million to purchase life insurance policies for the Funds. They also purported to include life insurance policies as assets of the Funds that Mueller and Policy Services had purchased for Mueller's earlier investment funds. Notably, Defendants purchased no new insurance policies for the Funds after September 2017, despite raising approximately $43 million for the Funds after that time.

6. Defendants used the vast majority of the Funds' assets – virtually all of which came from investors in the 575 Fund and the GRD Fund – like a piggy bank to fund Mueller's deeproot-affiliated businesses, the Relief Defendants. Indeed, Mueller funneled more than $30 million of the Funds' assets to the Relief Defendants in non-arms-length transactions whenever he determined the Relief Defendant businesses had expenses that needed to be paid, and he did so without any analysis as to whether such transfers constituted suitable investments for his client Funds. Further, Mueller made these transfers to Relief Defendants without obtaining anything of substance in return for the Funds and without memorializing the transactions in any way.

7. Since 2015, neither the life insurance policies nor the “capital” investments in affiliated businesses have yielded significant revenue or cash flow for Defendants or the Funds. This caused Mueller and Policy Services to default on the purchase of one $10 million face value life insurance policy, losing nearly $3.5 million of the Funds' money in the process. It also caused Mueller and deeproot to make more than $820,000 of Ponzi-like payments to earlier investors in the Funds using money raised from new investors, and make at least $177,000 in payments from money borrowed on a short-term basis using the life insurance policies as collateral.

8. Despite making statements suggesting he took no compensation from the Funds, Mueller commingled assets of the Funds in deeproot and Policy Services bank accounts and used them to make ad hoc salary payments to himself whenever investor money was available, totaling roughly $1.6 million from 2016 through 2020.

9. Mueller also used more than $1.5 million of the Funds' assets to pay hundreds of personal expenses, including his daughter's private school tuition, vacations with his family, his second wedding, his second divorce, his third wedding, jewelry for both his second and third wives (including engagement rings and wedding bands for both wives), other lifestyle spending for and by his family, and to buy a condominium in Kauai, Hawaii. When asked by SEC counsel during investigative testimony about his use of the Funds' assets to pay for these personal and family expenses, Mueller asserted his Fifth Amendment right against self-incrimination.

10. As alleged in this Complaint, Defendants directly or indirectly employed a device, scheme, or artifice to defraud, made untrue statements of material fact or material omissions, and engaged in acts, practices, or courses of business which operate or would operate as a fraud or deceit, in connection with the purchase or sale of securities, and in the offer and sale of securities. As a result, Mueller and deeproot violated Sections 17(a)(1)-(3) of the Securities Act of 1933 ("Securities Act") [15 U.S.C. $ 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. $ 78j(b)) and Rules 105-5(a)-(c) thereunder [17 C.F.R. $ 240.106-5]. Likewise, Policy Services, acting by and through Mueller, violated Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 105-5(a) and (c) thereunder.

11. As alleged in this Complaint, Defendants Mueller and deeproot, both investment advisers, directly or indirectly employed a device, scheme, or artifice to defraud clients or prospective clients; engaged in transactions, practices, or courses of business which operated as a fraud or deceit upon clients or prospective clients; and otherwise engaged in acts, practices, or a course of business which were fraudulent, deceptive, or manipulative. Accordingly, Defendants Mueller and deeproot violated Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940 (“Advisers Act”) [15 U.S.C. $ 80b-6] and Rule 206(4)-8 thereunder [17 C.F.R. $ 275.206(4)-8).

12. Because the Relief Defendants received proceeds of Defendants' fraudulent conduct without providing consideration in exchange, they have no legitimate claim to such money. Accordingly, Relief Defendants were unjustly enriched and must disgorge their ill-gotten gains resulting from Defendants' violations.


Over our 30+ year history the Sonn Law Group is has recovered hundreds of millions for victims of Ponzi schemes. If you invested with Robert J. Mueller of deeproot funds LLC we want to help you recover your losses. Call us anytime at 844-689-5754 or complete this short form. We look forward to hearing from you.