The Spangler Group was an investment firm owned and ran by Mark Spangler. In 2013 Spangler was found guilty of 31 counts of fraud including one count of investment-adviser fraud. For a period of 8 years he took funds that were supposed to be invested into publicly traded securities and instead used them for two startup business which he co-founded; TeraHop and Tamarac. The fraud was discovered because the SEC had a surprise inspection of the books done and it was found there were no independent audits being done. The same year his company filed for receivership and the SEC and U.S. Attorney's office began an investigation as to what Spangler did with the $56 million that he received from his clients to invest. Spangler received 16 years in prison, 3 years of supervised release (house arrest) and restitution of 19.8 million.
How could this fraud have been prevented?