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The Securities and Exchange Commission is charging ex-Samoyedic’s Inc. and Fun Cool Free Inc. founder Craig V. Sizer and boiler room operator Miguel Mesa with involvement in a $20M penny stock scam to bilk senior investors and others. At least 600 investors were allegedly victimized in the fraud. The two men have consented to partial settlements of the civil charges accusing them of violating broker-dealer registration and anti-fraud provision of federal securities laws. However, they are not admitting to or denying the claims. 
 
According to the Commission, Sizer hired Mesa to draw in and bilk investors in both his companies. Mesa ran boiler rooms in California and Florida. Sizer gave Mesa pitch points for boiler room agents to use when selling stock shares.  The points included alleged misrepresentations, including that investor money would go toward development and research but not toward commissions. Sizer also purportedly solicited investors by phone using the same misrepresentations and omissions to sell company shares.
 
Unfortunately, contends the regulator, the two men misappropriated about 90% of the money raised for their own enrichment and to pay the agents their sales commissions of 15-20%.  Sizer is accused of using at least $3M on his own spending.

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According to Bloomberg, the retirement system of Puerto Rico has joined a lawsuit against UBS Financial Services, Inc. (UBS) for poor returns that the retirement system received on $3 billion the it borrowed on UBS’s recommendation. Six beneficiaries originally brought this Puerto Rico bond fraud case in 2011 against UBS and two smaller broker-dealers.UBS was the underwriter of bonds sold by the judiciary retirement systems and employees eight years ago.  UBS also served as investment consultant, adviser, and bond fund manager. The bond proceeds were supposed to earn a positive return as compared to the interest paid on the bonds.  According to UBS, this would help Puerto Rico resolve some of its pension shortfall.  However, UBS, according to the complaint, put too much of the bond proceeds toward low-yielding accounts that made “negative income.”

Now, Puerto Rico’s pension funds are in financial trouble and could go broke as early as 2018.  System administrator Pedro R. Ortiz said that the system’s board is looking to obtain a  “significant recovery” for pensioners and participants.

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Three years after the U.S. Securities and Exchange Commission barred Ray Lucia Sr. from the securities industry, the ex-investment adviser and radio talk show host is still seeking to overturn that decision. Last week, he filed a petition asking the U.S. Court of Appeals for the D.C. Circuit to hear his case again.

It was just last August that the appeals court heard his petition but refused to review and vacate the SEC ruling. His latest petition was submitted en banc, which could allow all 11 members of the appeals court to refuse to hear the case or decide to do so and issue a vote.

Lucia, who once touted a “buckets of money” investment strategy for retirement was barred after an SEC administrative law judge found that the ex-investment adviser misled investors about the strategy’s approach to growing retirement assets. According to the regulator, the inflation rates Lucia employed to “back-test” his strategy failed to factor in the historical inflation rates during the time periods that were supposedly relevant.

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The Financial Industry Regulatory Authority has ordered Avenir Financial Group to pay a $229K fine over allegations that the latter engaged in the fraudulent sale of promissory notes and equity interests in the firm. Avenir is suspended from taking part in the self-offerings of securities for two years.
According to the FINRA hearing panel, the firm, its ex-CEO/CCO Michael Todd Clements, and registered representative Karim Ahmed Ibrahim, also known as Chris Allen, purposely omitted or misrepresented material facts related to the sale of equity interests in the firm. Avenir is accused of making misrepresentations when selling debt and equity interests in the holding company of its branch office.
The FINRA ruling said that in 2013, Avenir solicited investors through funds via an equity self-offering because the firm needed capital. The self-regulatory organization said that Clements told Ibraham to tell customers that this money would go toward day-to-date operations and growth at Avenir but did not tell him about the firm’s financial issues and certain other information.

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The Financial Industry Regulatory Authority has barred ex-broker Douglas Wayne Studer after it was discovered that he was named to inherit a 91-year-old customer’s Florida waterfront condominium. FINRA’s investigation, which began last year, sought to determine whether he violated his ex-employer’s policy by being named in the estate documents belonging to the elderly investor.

Without denying or admitting to FINRA’s allegations Studer agreed to the sanction. Until July, Studer had worked for Kovack Advisors Inc.  since last October. 
 

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Chad Peter Smanjak has been sentenced to a year and a day in prison. Smanjak admitted to operating a pump-and-dump scam linked to a company founded by Daniel Ruettiger, also known as Rudy. Ruettiger’s time playing football at Notre Dame was retold in the movie “Rudy.”

Smanjak is accused of targeting over 250 investors in his penny stock scam, which made at least $5M in profits. Although he had co-conspirators, Smanjak was the only person indicted in this securities case.

The penny stock in the scam was issued by Rudy Nutrition, which Ruettiger founded. The sports drink company claimed it was selling health conscious drinks.

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The Financial Industry Regulatory Authority is ordering Ameriprise Financial Services (AMP) to pay $50K for failing to properly supervise and notice  that one of its brokers was bilking his own family members. According to the self-regulatory organization, the registered representative took over $370K from five firm customers, which included his domestic partner, mother, grandparents, and stepfather.
From 10/11 to 9/13, the broker moved the funds to a business account. The transfers went undetected for two years because Ameriprise purportedly neglected to adequately supervise the moving of customer funds to third parties. It wasn’t until 9/13 that evidence was found that the broker had been practicing the signature of a family member.
The Ameriprise broker turned in forms to move the money from the brokerage accounts of customers into a business bank account. The transfer was under the guise of making investments. Instead, said FINRA, the broker allegedly used the money to pay himself commissions and an additional salary.

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The Financial Industry Regulatory Authority announced that UBS Financial Services and its Puerto Rico subsidiary (UBS) must collectively pay three investors $750,000 in damages for losses they sustained from investing in UBS’s proprietary Puerto Rico closed-end bond funds and Puerto Rico bonds. The claimants are Jenny Robles Adorno, Desarrollos Jarra SE, and Jose A. Rivera.

The investors accused UBS of recklessness, fraud, and negligence. They sought compensatory damages, punitive damages, and reimbursement of commissions that they said were unlawful. In San Juan, the FINRA arbitration panel awarded Rivera $562,500, Robles $30,000 and Jarra $157,500. UBS said it was “disappointed” with the panel’s decision to award any damages to the claimants.

This is not the first Puerto Rico bond fraud arbitration case in which UBS has been ordered to pay investors. Just this March, the firm had to pay over $470,000 to three investors who said their accounts were over-concentrated in the same Puerto Rico focused investments. The claimants in that case alleged negligent supervision and fraud. Similarly, UBS was ordered to pay a former television executive over $1,400,000 in the fall of 2015 for over-concentrating the former customer in UBS’s proprietary funds and misrepresenting the risks of those investments.

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Charles August Banks IV was arrested in San Antonio this week. Banks, is charged with two counts of wire fraud related to a $7.5M investment that former NBA basketball star Tim Duncan made with Gameday Entertainment, a sports merchandising company. Banks became Duncan’s financial adviser nearly two decades ago while working for CSI Capital management and he advised him for years.

Banks, now a renowned wine investor,  is  also facing a securities fraud lawsuit brought by the SEC. Although Duncan, formerly with the San Antonio Spurs, isn’t named specifically in the complaint, the regulator said that the case involves an ex-pro basketball player who was Banks’ client.

The SEC claims that Banks made material misrepresentations and omissions of key facts to the basketball player to persuade him to invest in Gameday.  Among the alleged misrepresentations:

The U.S. Securities and Exchange Commission said that BOK Financial Corporation subsidiary BOKF NA will pay over $1.6M to resolve charges accusing the Oklahoma-based bank of ignoring signs that businessman Christopher F. Brogdon was engaged in suspect activates related to his management of municipal bond offerings for investors. Brogdon was charged by the regulator with fraud last year and he must pay back investors $85M.
The federal government accused him of collecting almost $190M through private placement offerings and muni bond offerings. Investors thought they would earn interest from money made by assisted living facilities, nursing homes, or another retirement community project. Instead, Brogdon commingled accounts and redirected investor funds to other ventures and his own expenses.

According to the regulator, BOKF and ex-senior VP Marrien Neilson found out that Brogdon was taking money out from reserve funds for the muni bond offerings and not replacing the money. They also became aware that he had neglected to file annual financial statements for the bond offerings.

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