December 16, 2014

FINRA Orders Merrill Lynch to Pay $2.4M in Fine, Restitution for Hundreds of Securities Transactions That Violated Fair Price Guidelines

FINRA is ordering Bank of America’s (BAC) Merrill Lynch to pay a $1.9M fine for violating fair price guidelines over seven hundred times during a two-year period. The financial firm also must pay restitution of over $540K to customers that were affected.

According to the self-regulatory organization, Merrill’s credit trading desk purchased MLC notes from retail customers at up to 61.5% under the market price. General Motors had issued the notes prior to its bankruptcy. MLC Notes stands for Motors Liquidation Company Senior Notes.

Out of 716 transactions, 510 of them involved notes bought at markdowns that were greater than 10%. The desk would then sell the notes to brokers at market cost.

Issuing a statement, FINRA EVP and market regulation head Thomas Gira said that the SRO expects firms to abide by their duties to customers in regards to fair pricing. Gira said Merrill Lynch’s markdowns of the MLC Notes were not acceptable.

FINRA says the firm lacked a proper supervisory system that could identify this kind of violation. It is accusing the firm of failing to perform assessments of the credit desk after trades were made.

Merrill Lynch is settling without denying or admitting to the securities charges. It has, however, consented to an entry of the regulator’s findings.

As part of the agreement, over the next year and a half, Merrill Lynch will provide reports related to the credit desk’s supervisory system and its effectiveness. The firm says that it has since enhanced its supervisory efforts and taken disciplinary action.

FINRA Fines Merrill Lynch $1.9 Million and Orders Restitution of $540,000 for Fair Pricing and Supervisory Violations Related to Purchases of Distressed Securities, FINRA, December 16, 2014

Reliance Financial Advisors, Owners Face SEC Fraud Charges Involving Hedge Fund, Stockbroker Fraud Blog, December 15, 2015

Morgan Stanley Fined $4M by the SEC for Market Access Rule Violation, Institutional Investor Securities Blog, December 12, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

December 15, 2014

Reliance Financial Advisors, Owners Face SEC Fraud Charges Involving Hedge Fund

The SEC is charging Reliance Financial Advisors and its co-owners Walter F. Grenda Jr. and Timothy S. Dembski with securities fraud. The agency says that the Buffalo, NY-based investment advisory firm and the two men misled clients when recommending that they get involved in a hedge fund managed by portfolio manager Scott M. Stephan.

Grenda and Dembski guided senior investors toward making highly speculative investments in the Prestige Wealth Management Fund, which Stephan managed, even though they allegedly knew he was inexperienced in this type of investing. The clients, who were either close to retirement, retired, or living on fixed incomes, collectively invested around $12 million.

Stephan was supposedly going to employ a trading strategy that involved a specific computer “algorithm,” which actually only day traded. Instead, he started making trades manually, his approach eventually playing a part in the hedge fund’s failure. The SEC has said that Stephan’s investing experience was greatly exaggerated in offering materials. (The majority of his career involved collecting car loans that were overdue.)

In late 2012, when the fund did not make the positive returns that were anticipated, Grenda pulled out his clients. When the fund failed, losing around 80% of its value, Dembski’s clients lost most of what they invested.

The SEC’s Enforcement Division also alleges that in 2009, Grenda borrowed $175,000 from two clients, claiming it was a business loan when he used the funds for personal spending. The agency is accusing Grenda, Dembski, and Reliance Financial Advisors of violating provisions of the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, and the Securities Act of 1933.

In another order, Stephan consented to settle findings accusing him of violating the antifraud provisions of the three acts, as well as abetting, aiding and causing violations of these provisions by Prestige Wealth Management Fund’s general partner. He consented to a permanent bar from the securities industry. However, he is not denying or admitting to the allegations.

Contact our investment adviser fraud law firm today.


SEC Announces Fraud Charges Against Buffalo-Based Firm and Co-Owners Accused of Misleading Investors in Hedge Fund
, SEC, December 10, 2014

More Blog Posts:
SEC Headlines: Regulator Probes Oppenheimer Executive, Prepares Insider Trading Case Against Policy Research Firm, & Wants to Suspend Standard & Poor’s From Rating CMBSs, Stockbroker Fraud Blog, December 10, 2014

Ex-California Insurer Charged with Running $11M Ponzi Scam, Stockbroker Fraud Blog, December 8, 2014

Morgan Stanley Fined $4M by the SEC for Market Access Rule Violation, Institutional Investor Securities Blog, December 11, 2014

December 13, 2014

Atlas Energy’s Oil and Gas Private Placement May Not Be Such a Good Investment for Outside Investors

Atlas Energy LP Is inviting investors to put in at least $25,000 in an oil and gas drilling partnership in Texas and other states in exchange for shared revenue from the output from the wells. Its subsidiary, Atlas Resources LLC, is seeking to raise up to $300 million by the end of the year, with the company saying it will put in up to $145 million of its own money. However, according to Reuters, a closer look at the company’s confidential offering memorandum reveals that outside investors may not end up reaping as much as they think.

The private placement venture is called Atlas Resources Series 34-2014 LP. Private placements are unregistered securities sold to a limited number of investors via brokerage firms. Brokers can only market them to accredited investors (investors that have $1 million in assets—primary residence not included—or $250,000/year income) or institutions. Because of inflation, the number of those that qualify to be able to invest in private placements has gone up and not every investor is a high-income one. There are even retirees who now qualify.

According to the Atlas memorandum, $45 million of the money raised will go to Anthem Securities, an affiliate, to pay commissions to brokerage firms. Up to $39 million will go toward purchasing drilling leases from a different affiliate. Some of the $53 million for transport and drilling equipment may also go to affiliated suppliers. $8 million is a markup for estimated equipment costs. Atlas will get $53 million for markups and fees once drilling starts. All this lowers Atlas’s exposure by at least 40%. Once revenue starts coming in, the company is entitled to 33% of this.

After looking at the marketing materials and offering memoranda of half a dozen oil and gas private placements in the last 15 years, Reuters discovered that Atlas’s deal, placing the issuer at greater advantage than outside investors, is not uncommon. And out of over half of the 43 private placements it has put out in the last thirty years, outside investors either broke even or sustained financial losses. In 29 private placement deals, Atlas faired better than investors.

Energy ventures are typically high risk. Wells can end up producing nothing and returns may be impacted by gas and oil costs. Granted, there are tax benefits, with investors able to write off over 90% of initial outlay the first year. However, the risks can outweigh the benefits.

It doesn’t help that brokers, who are supposed to conduct due diligence on every issue they sell to make sure it is suitable for each investor, sometimes depend on due diligence companies that are paid by the issuers. Regulators still don’t have much oversight over private placements, which are not subject to a lot of reporting requirements. Also, oil and gas private placements often come with hidden fees.

If you suspect you were the victim of fraud, contact one of our private placement fraud law firm today. Shepherd Smith Edwards and Kantas LTD LLP is a Texas securities law firm.

Special Report: For these oil and gas bets, the odds favor the house, Reuters, November 11, 2014


More Blog Posts:
SEC Commissioner Wants Elder Fraud at Top of 2015 Agenda, Stockbroker Fraud Blog, November 29, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

Goldman Sachs Must Pay $7.6M to Two Brokers for Wrongful Termination, Institutional Investor Securities Blog, December 8, 2014

December 10, 2014

SEC Headlines: Regulator Probes Oppenheimer Executive, Prepares Insider Trading Case Against Policy Research Firm, & Wants to Suspend Standard & Poor’s From Rating CMBSs

SEC Investigating Ex-Oppenheimer Executive for Securities Law Violations
According to Bloomberg.com, Robert Okin, Oppenheimer & Co.’s (OPY) former retail brokerage head, is under investigation by the Securities and Exchange Commission. In October, the agency’s enforcement division notified Okin that, based on a preliminary determination, it intended to file charges against him for securities law violations, including failure to supervise.

Okin is no longer with Oppenheimer. He resigned earlier this month to pursue “other interests.” Okin denies violating the Securities Exchange Act.


Marwood Group LLC May Be Subject to Insider Trading Charges
Earlier this month, the SEC notified Marwood Group LLC that it is looking to bring an enforcement action against the Washington policy-research firm for insider trading.

The Commission is looking at whether Centers for Medicare and Medicaid Services officials gave the firm inside information about funding for Provenge, a prostate cancer drug. The product’s manufacturer, Dendreon Corp. (DNDNQ), saw its shares drop before the CMS decided to cut coverage on the medication in 2010, as opposed to after.

According to the regulator, a year before the CMS cut coverage, a CMS employee allegedly gave a Marwood employee insider information about the reduction. A week after the reduction was officially announced, the political intelligence put out a research report that included details about the change in coverage

A Marwood spokesperson maintains that the firm did nothing wrong, noting that no one benefited financially from the information. However, SEC officials have said that such a conversation is the equivalent of insider trading.

Under the 2012 Stop Trading on Congressional Knowledge Act, public officials are obligated to keep government-related non-public data hat could shift share prices confidential.


SEC Looks to Suspend S & P from Rating Commercial Mortgage-Backed Securities
The Commission wants to suspend Standard & Poor’s from rating CMBSs. The regulator has been probing whether the credit rating agency modified criteria in 2011 to win business.

In July, the regulator sent S & P a Wells notice notifying it that the agency was pursuing an action linked to six commercial mortgage-backed securities ratings from a few years ago. The purported violations involve the public disclosure and rankings that the credit rating agency made about the securities.

It was in 2011 that the S& P withdrew the grades it issued for a CMBS offering that came from Citigroup (C) and Goldman Sachs Group (GS). This caused both institutions to drop the deal after its placement with investors.

Standard & Poor had withdrawn the rankings to assess whether there were conflicts in the way it used its methodology. It also stopped rating new CMBSs. In August of that year, however, S & P said that it would resume grading deals, noting that the conflict was not a big deal. It modified its criteria the following year and went back into the market.

SEC investigating top Oppenheimer executive
, Investment News, December 10, 2014

Marwood Grp Gets Wells Notice in Insider Trading Crackdown on 'Political Intelligence'
, Fox Business, December 9, 2014

SEC Seeking S&P’s Suspension From Rating Commercial Mortgage Bonds, Bloomberg, December 8, 2014

2012 Stop Trading on Congressional Knowledge Act (PDF)


More Blog Posts:
Ex-California Insurer Charged with Running $11M Ponzi Scam, Stockbroker Fraud Blog, December 8, 2014

Morgan Stanley Fined $4M by the SEC for Market Access Rule Violation, Institutional Investor Securities Blog, December 11, 2014

SEC Claims Fraud Involving a REIT and Bogus Senior Resident Occupants, Institutional Investor Securities Blog, December

December 8, 2014

Ex-California Insurer Charged with Running $11M Ponzi Scam

Joseph Francis Bartholomew is charged with 30 felony counts related to his alleged operation of an $11 million Ponzi scheme. The 75-year-old former licensed insurance agent has been called Orange County, Ca.’s Bernard Madoff, after the financier who ran a multibillion-dollar Ponzi scam for decades. Bartholomew allegedly bilked over 27 investors.

According to the California State Department of Insurance, he used his insurance business, MBP Insurance Services, to get people to trust him. Those involved reportedly included a number of family trusts, a church, an ex-baseball player, and senior citizens.

The Orange County Register said that Bartholomew made false promises to investors telling them that they could earn fast returns of up to 40%. For example, he is accused of offering one investor an unsecured investment while making the claim that the customer would get $10,000 a month if he invested $500,000. Bartholomew allegedly gave fraudulent assurances that the investment on third party life insurance policies was a legitimate one. He also made other misrepresentations, including claiming that over the last decade there had been no problems getting payments to investors.

Bartholomew had stopped paying investors by March 2013.

He is accused of running his financial scam from 2005 into 2014. If convicted, he faces up to 40 years behind bars.

Also charged for her alleged involvement in Bartholomew’s Ponzi scam is insurance agent Wendy King-Jackson. She worked at MBP Insurance Services.

King-Jackson is accused of selling unsecured securities connected to bogus insurance policies. She allegedly told clients that the policies were legitimate and the investments were legal while falling to notify them that the California Department of Corporations did not give the insurer the authority to sell the securities. She faces up to 16 years maximum in state prison if convicted.

Two OC residents arraigned in $11 million Ponzi scheme, Insurance.Ca.Gov, December 4, 2014


More Blog Posts:
SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, September 11, 2014
SEC Commissioner Wants Elder Fraud at Top of 2015 Agenda, Stockbroker Fraud Blog, November 29, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Securities Blog, December 5, 2014

December 5, 2014

CFTC, FINRA, and SEC Fight Investor Fraud Together

The Commodity Futures Trading Commission has launched CFTC SmartCheck. The site gives consumers information about financial fraud. It links to The Securities and Exchange Commission’s EDGAR product registration database and the Financial Industry Regulatory Authority’s BrokerCheck system, as well as to the National Futures Association. For the first time the three regulators are joining forces to combat investor fraud. The site makes checking the backgrounds of brokers and investment advisers more localized.

This year, the CFTC spent around $4.2 million in consumer protection and has an even bigger budget for next year. Under the Dodd-Frank Act, the CFTC was given authority to establish a consumer protection fund that covers whistleblower office and education initiatives.

Last month, the North American Securities Administrators Association announced that in 2013 state securities regulators increased the number of formal enforcement actions they initiated against licensed broker-dealer sales representatives, as well as firms and individuals that didn’t have a license. The states reported 810 actions against unlicensed firms or individuals, which is 34% more than the year before. There was an 89% rise in actions against (357) licensed broker-dealer agents between the same time period.

Also, between ’12 and ’13:

• Enforcement actions against licensed investment adviser representatives went up 11% to 176 from 158.

• The number of enforcement actions against investment adviser firms went down 4% from 174 to 181.

While efforts by regulators to combat fraud is important, if you are an investor that has sustained losses from securities fraud committed by a registered or unregistered financial firm or representative, your best chances of recovering your funds is to work with an experience securities lawyer.

Commodity Futures Trading Commission teams up with SEC and Finra to combat investor fraud, Investment News, November 19, 2014

CFTC SmartCheck

EDGAR

NASAA Enforcement Report (PDF)

FINRA BrokerCheck

National Futures Association


More Blog Posts:
Judge Orders Texas-Based Life Partners Holdings Inc., Two Executives to Pay $46.9M Over Securities Filings, Stockbroker Fraud Blog, December 3, 2014

Madoff Ponzi Scam Victims Recover Over $10 Billion, Institutional Investor Fraud Blog, December 5, 2014

SEC Files Charges Against Former Broker-Dealer Owner Over Fraudulent Stock Sales, Stockbroker Fraud Blog, December 2, 2014

December 3, 2014

Judge Orders Texas-Based Life Partners Holdings Inc., Two Executives to Pay $46.9M Over Securities Filings

Life Partners Holdings Inc., its CEO Brian D. Pardo, and general counsel R. Scott Peden must pay $46.9M in penalties and disgorgement. This is the final judgment in the wake of a verdict in the U.S. Securities and Exchange Commission’s civil case. The jury found them liable for submitting securities filings that were misleading and untrue. Life Partners sells life insurance investments.

U.S. District Judge James Nowlin, in his judgment, said that oversight and compliance at the Texas-based company “were non-existent.” He accused the defendants of serious violations of securities laws.

The judgment is a partial vindication for the SEC. After the verdict was issued earlier this year, both sides declared the outcome a victory for each.

The Commission accused the company of accounting and disclosure fraud that went on for years involving allegedly misleading marketing practices when selling life insurance investments to investors. While jurors found Life Partners liable for securities fraud involving revenue-recognition practices, they rejected the regulator’s main fraud and insider trading claims. The main allegations was over the claim that Life Partners gave inaccurately short estimates for the duration that insured individuals were expected to live, which is a key factor of the investment equation.

With life insurance investments, an investor buys the right to get an individual's life insurance benefits, while the person who owns the policy receives a lump sum. The investor then keeps paying premiums, with the hope of ending up receiving more than what is spent. Investors, however, won’t get as high of a return or can sustain financial losses if the insured lives longer than estimated.

The jury found that Peden and Pardo were also liable for helping in and abetting Life Partner’s submission of false reports. They ruled that Pardo was responsible for the false certification of Life Partner’s filings.

Under Nowlin’s judgment, Life Partners must pay $23.7 million in civil penalties and $15 million in disgorgement. Pardo must pay $6.2 million in civil penalties, while Peden has to pay $32 million.

Life Partners is still contending with civil court actions by individual investors. There is also a class action securities case that was filed four years ago. Earlier this year, a district judge in Texas refused to throw out the claims made by those plaintiffs.

Also, Life Partners is dealing with a separate case brought state securities regulators. That lawsuit is now at the Supreme Court of Texas. The state has accused Life Partners and a number of affiliates of fraud related to the sale of securities.

Shepherd Smith Edwards and Kantas, LTD LLP is a Texas securities fraud law firm. Please contact our securities attorneys for your free case consultation.

SEC's $47M Life Partners Win Could Derail Investor Class Action, Litigation Daily, December 3, 2014

Mixed Verdict in SEC Suit Against Life Partners
, The Wall Street Journal, February 4, 2014


More Blog Posts:
SEC Files Charges Against Former Broker-Dealer Owner Over Fraudulent Stock Sales, Stockbroker Fraud Blog, December 2, 2014

FINRA Orders Houston-Based USCA Capital Advisors LLC to Pay $3.8M to 19 ExxonMobil Retirees, Stockbroker Fraud Blog, November 24, 2014

SEC Claims Fraud Involving a REIT and Bogus Senior Resident Occupants, Institutional Investor Securities Blog, December 3, 2014

December 2, 2014

SEC Files Charges Against Former Broker-Dealer Owner Over Fraudulent Stock Sales

The Securities and Exchange Commission is charging Vinay Kumar Nevatia with making fraudulent stock sales. According to the regulator, Kumar sold about $900,000 of stock in CSS Corp. Technologies Limited. The stock in the privately held data technology company supposedly belonged to him even though these were shares that he had already bought for other people a few years back.

The SEC claims Kumar conducted the sales via secret wire transfers, got the stock transfer agent to record the bogus transactions, and stole investors’ money to use as his own. He also purportedly gave the earlier share owners bogus updates about their investments even after he sold their stock off to others so that they would think that the shares still belonged to them.

Kumar is not registered with the Commission and he does not have a license to trade securities. He also is accused of using numerous aliases while residing in Palo Alto, Ca. The SEC is charging him with violating the antifraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. It wants Kumar to pay a financial penalty and give back ill-gotten gains. The regulator is also looking to get permanent injunctions.

Kumar used to own KBR Capital Markets, a now defunct brokerage firm that dealt in wholesale illiquid alternative investments. From ’07-’13, Kumar solicited securities and real estate investments via the different entities he controlled and owned.

Contact our stockbroker fraud lawyers today to request a free case consultation.

Read the SEC Complaint (PDF)


More Blog Posts:
SEC Commissioner Wants Elder Fraud at Top of 2015 Agenda, Stockbroker Fraud Blog, November 29, 2014

Citigroup, Bank of America Are Selling Soured Home Loans, Sources Tell Bloomberg, Stockbroker Fraud Blog, November 13, 2014

Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014

November 29, 2014

SEC Commissioner Wants Elder Fraud at Top of 2015 Agenda

U.S. Securities and Exchange Commissioner Michael S. Piwowar says that he wants investigations into elder fraud to stay one of the agency’s top priorities in 2015. Financial fraud targeting seniors is costing this demographic big time. According to a 2011 study by MetLife and the Center for Gerontology at Virginia Tech senior financial fraud victims sustain around $2.9 billion in losses yearly.

One of the reasons for this is that older Americans tend to make more vulnerable targets for fraudsters. They are easier to deceive with bogus sales pitches and some of them may suffer from debilitating mental or cognitive illnesses that can make it hard for them to know they are being bilked.

Also, scammers like to go after elder investors because many of them have accumulated enough retirement money that they have significant funds that fraudsters can steal. Unfortunately, a senior that is the victim of elder financial fraud may no longer have the time or be at an age when he/she can earn back whatever is lost, which can make his/her retirement years a struggle.

Just recently, an ex-insurance agent was accused of numerous felony counts of grand theft, identify theft, and embezzlement. His alleged victims included over 50 elderly clients.

Also this month, a North Carolina woman recently entered a plea related to elder exploitation accusations involving a man over whom she possessed power of attorney. Jessica Lynn Isley is accused of making personal charges to Harold Rudd’s bank account over a more than two-year period. Isley reportedly agreed to a plea that did not require that she admit guilt. She will pay over $30,000 in restitution.

In Oregon, police recently arrested Angela Chisholm for numerous felonies involving financial transactions that impacted the accounts of a 71-year-old. A few months before that, four people were charged in an NFL-related financial scam that also went after senior citizen victims. The fraudsters allegedly raised about $2.4 million by claiming they had technology that the NFL was going to use.

These are just a few of the many incidents of elder financial fraud that happen every year. In August, the North American Securities Administrators Association announced the establishment of the Committee on Senior Issues and Diminished Capacity, a board-level committee that would deal with challenges faced by senior investors. NASAA noted that in the last six years, 34% of enforcement actions initiated by state regulators involved senior victims. 3,548 actions between ’08 and ’13 involved elderly targets no younger than age 62.

At Shepherd Smith Edwards and Kantas, LTD LLP, our senior financial fraud lawyers represent elderly clients (or their families) that sustained significant financial losses because they were bilked. We are here to help senior investors recoup what was taken from them.

SEC Commissioner Pushes For Elder Fraud To Top 2015 Agenda, InsuranceNewNet.com, November 7, 2014

The MetLife Study (PDF)

Woman pleads in elder exploitation case, The Times News, November 26, 2014

Hanover woman charged for embezzling thousands from family member
, NBC12.com, November 26, 2014

Four Charged in NFL-Related Securities Fraud Scheme Targeting Senior Citizens, FBI, July 25, 2014


More Blog Posts:
Securities Fraud Headlines: ConvergEx Group Subsidiary Gets Criminal Sentence for Fraud, Ohio Man Gets Prison Term for Scam, Two Men Face Charges Over Predictive Software, and Fund Manager Admits to $17M Ponzi Scam, Stockbroker Fraud Blog, November 28, 2014

Citigroup, Bank of America Are Selling Soured Home Loans, Sources Tell Bloomberg, Stockbroker Fraud Blog, November 13, 2014

Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014

November 28, 2014

Securities Fraud Headlines: ConvergEx Group Subsidiary Gets Criminal Sentence for Fraud, Ohio Man Gets Prison Term for Scam, Two Men Face Charges Over Predictive Software, and Fund Manager Admits to $17M Ponzi Scam

CGM Limited Pleads Guilty to Securities Fraud
CGM Limited, a subsidiary of ConvergEx, must pay a criminal penalty and restitution of $26 million for conspiracy to commit both securities fraud and wire fraud, as well as for wire fraud. The U.S. Department of Justice says that CGM limited charged clients millions of dollars in hidden and unwarranted fees. CovergEx is a global trading and brokerage firm. CGM Limited pleaded guilty to the criminal charges.

The government says that CGM Limited and certain traders and executives bilked clients by lying to them and taking the money in the form of fees. CGM Limited admitted that there were ConvergEx Group broker-dealers that regularly sent over securities trade orders so a mark-up could be taken when the orders were executed.

To hide the fees, traders issued false transaction reports to clients that included inaccurate details about how many many shares were part of a trade, how long it took to execute a trade, and the price at which shares were sold or bought. In total, about $12.8 million in trading profits were taken from the clients who were sent the false statements.

CGM Limited and ConvergeEx Group are paying about $43.8 million in restitution and criminal penalties.

Ohio Man to Go to Prison for $1.8M Securities Fraud
Anthony Davian was sentenced to almost five years behind bars for running a fraudulent investment scam that bilked investors of close to $1.8 million. Davian, who is from Ohio, pleaded guilty earlier this year to wire fraud, mail fraud, securities fraud, and money laundering. He also must pay nearly $1.8 million in restitution.

Between 2008 and 2013, Davian used Davian Capital Advisers LLC to sell securities to at least 20 investors in several states. But rather than investing customer’s funds, he paid back earlier investors and bought himself expensive items. He persuaded them to place money in his hedge fund by pretending that he oversaw millions of dollars.

Direction Labs Executives Charged with Soliciting Investments In Predictive Software
Direction Labs Chairman Chisan Cong and COO Steve Linnenkamp are facing multiple counts of felony securities fraud and theft. The two men were arrested and charged with soliciting investments in predictive software that they claimed could let investors know whether to go into or leave positions. The product was supposed to eliminate any guesswork in making trades on domestic and foreign exchanges. One investor was purportedly bilked out of $848,000.

Investment Fund Manager Enters Guilty Plea, Admits to $17M Ponzi Scam
James M. Peister has pled guilty to securities fraud involving a $17.9 million Ponzi scam. In addition to forfeiting that amount, Peister has consented to pay over $9.6 million in restitution to investors that were defrauded. He also faces up to 20 years behind bars and a $5 million fine.

Peister fooled 74 investors about how well their investments were doing in funds that he managed so they wouldn’t try to get their money back. The scam went on for nearly 10 years, during which time he used investors’ money to pay for his expensive lifestyle and pay earlier investors. He also deceived investors by generating false financial statements to make it appear as if their investments were doing well and so they would keep investing.

Peister’s Ponzi scheme was discovered when the investor pool ran out of funds during the 2008 financial crisis.

Investment Fund Manager Pleads Guilty to Securities Fraud for Operating a $17 Million Ponzi Scheme, Federal Bureau of Investigation, November 12, 2014

2 Greenwood Village executives arrested, charged with bilking Englewood couple out of $848,000, The Denver Channel, November 28, 2014

Securities Fraud Nets Ohio Man Prison Sentence, FA-Mag, November 26, 2014

ConvergEx Group Subsidiary Sentenced for Securities Fraud Scheme, FBI, November 19, 2014


More Blog Posts:
Unregistered Florida-Based Broker Charged with Securities Fraud, Stockbroker Fraud Blog, November 26, 2014

Citigroup, Bank of America Are Selling Soured Home Loans, Sources Tell Bloomberg, Stockbroker Fraud Blog, November 13, 2014

Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014

November 26, 2014

Unregistered Florida-Based Broker Charged with Securities Fraud

The SEC has charged Albert Scipione with securities fraud allegedly involving stealing investor money in a day trading scam. Scipione, who is an unregistered broker, has already pleaded guilty to criminal charges in a parallel case.

According to the SEC, Scipione and Matthew P. Ionno pursued investors to set up accounts at their Traders Café for day trading. This involved the swift selling and buying of stocks during the day to see if stock values will rise or fall while the stock is owned so a quick profit can be made. Traders Café, which belonged to two men, was never registered with the Commission as a brokerage firm.

Scipione purportedly pushed the company’s trading platform while making bogus misrepresentations to investors about high trading leverage, fees, commissions, and their assets’ safety. The regulator says that Scipione and Ionno raised over $500,000. Investors were told that their money would be only used for day trading or certain other specified uses. Instead, a lot of customers found that they couldn’t trade at all.

Scipione and Ionno took almost all of the investors’ funds for their own spending. They are accused of trying to conceal their day trading scam by making up delays and excuses for why they couldn’t get their money refunded. The SEC wants disgorgement of ill-gotten gains, penalties, and other relief.

At Shepherd Smith Edwards and Kantas, LTD LLP our broker fraud lawyers are here to help investors get back their losses.

Read the SEC Complaint (PDF)


More Blog Posts:
FINRA Orders Houston-Based USCA Capital Advisors LLC to Pay $3.8M to 19 ExxonMobil Retirees, Stockbroker Fraud Blog, November 24, 2014

Citigroup, Bank of America Are Selling Soured Home Loans, Sources Tell Bloomberg, Stockbroker Fraud Blog, November 13, 2014

Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014

November 24, 2014

FINRA Orders Houston-Based USCA Capital Advisors LLC to Pay $3.8M to 19 ExxonMobil Retirees

A Financial Industry Regulatory Authority arbitration panel said that USCA Capital Advisors LLC must pay over $3.8 million to 19 ExxonMobil retirees whose investments were mismanaged the Houston-based wealth management firm. The self-regulatory organization also says that the Texas investment advisory firm misled the investors about its trading strategy.

It is not uncommon for Houston financial advisers to target ExxonMobil retirees as clients. The oil company has a huge outfit and other operations in the area. According to the investors, USCA was tasked with handling their retirement savings because of promises the investment advisors made to protect, oversee, and grow their accounts.

At a presentation by USCA RIA LLC, which is USCA’s investment advisory arm, advisers told investors about their Total Return model program, which they claimed would up S & P 500 gains while lowering the risks involved in trading equities. Investors said they were told the strategy would hold primarily exchange-traded funds and U.S. stocks in a rising market and turn the money into cash when the markets dropped. Trades were to be stimulated by “objective technical factors.”

While some investors thought the program would handle trading, others thought that the firm would monitor computerized results, using the information to trade. They invested close to $40 million. They believe that they could have made $3 million from the strategy they thought the firms’ advisers were going to employ. Instead, they sustained $1.25 million in losses.

Of the $3.8 million FINRA arbitration award, $853,000 is punitive damages. $1.9 million are damages and interest. Nearly $1 million will go to legal bills and other expenses.

Shepherd Smith and Kantas, LTD LLP is a Texas stockbroker fraud law firm.

Texas Advisory Firm Ordered to Pay Exxon Retirees $3.8 Million, NASDAQ.com, November 20, 2014

Houston wealth management firm must pay $3.8 million to retirees: panel, Reuters, November 19, 2014


More Blog Posts:
Texas Pension Fund Sues Tesco For Securities Fraud, Stockbroker Fraud Blog, November 5, 2014

Ex-LPL Financial Adviser, James Bashaw from Texas, Lands at New Brokerage Firm, Stockbroker Fraud Blog, October 30, 2014

National Planning Holding Temporarily Stops Selling American Reality Capital Properties’ Nontraded REIT sales After Disclosure of $23M Accounting Error, Institutional Investor Securities Blog, October 31, 2014