Securities News: Barclays to Pay $120M to Settle Libor Rigging Litigation, Investment Advisor Firm Settles Charges Over Custody Rule Violations, and SEC Accuses Man of $190M Scam Involving Private Placements, Nursing Homes

Barclays Resolves Securities Fraud Claims Related to Libor Rigging
Barclays PLC (BARC) has consented to pay $120 million to resolve securities fraud claims accusing the bank of conspiring with competitors to manipulate the London Interbank Offered Rate, also known as Libor. Barclays is the first to settle allegations made by “over-the-counter” investors.

It was just last month that the British bank consented to pay $94M to resolve litigation accusing it of trying to rig Euribor, which is the euro-denominated equivalent of Libor. Barclays has admitted to rigging both benchmarks. The bank paid settlements to regulators in the United States and in Great Britain.

Libor is used to establish rates on hundreds of trillions of dollars of transactions, such as those involving student loans, credit cards, and mortgages. Banks use Libor to assess how much it will cost to borrow from each other. To date, over a dozen banks have been sued for conspiring to rig Libor.

U.S. District Judge Naomi Reice Buchwald in New York, who approved the class action settlement, said in August that the plaintiffs could win fraud claims if they proved that panel banks lied to the administrator of Libor about borrowing costs and the plaintiffs had depended on these fallacies. Buchwald, in 2013, threw out a “substantial” chunk of this private case, which included federal antitrust claims.

Investment Advisory Firm, Co-Founders to Pay $1M to Settle Custody Rule Violation Charges
Sands Brothers Asset Management LLC and co-founders Steven Sands and Martin Sands will pay a $1 million penalty to resolve Securities and Exchange Commission charges accusing them of violating the custody rule. They also have consented to a year suspension from raising funds from existing or new investors. The firm will under go compliance monitoring for three years. Ex-COO and CCO Christopher Kelly will pay a $60K penalty and serve a one-year suspension from acting as a COO or practicing in front of the SEC as a lawyer.

Under the custody rule, firms have to get independent confirmation of assets when they can control or access client funds or securities. This is so that investors know their money is protected from misuse or theft. The firm, the two Sands brothers, and Kelly settled the charges without or denying or admitting to them.

Georgia Man Accused of $190M Nursing Home Investment Scam
The SEC is filing fraud charges against Christopher F. Brogdon. According to the Commission, Brogdon collected close to $190M through private placement and municipal bond offerings. Investors gave him money to buy and renovate senior living facilities. They were supposed to earn interest via revenues generated by the retirement community, assisted living home, or nursing facility.

Instead, says the regulator, Brodgon mixed investor money rather than using the investments as they were intended and described in offering disclosure documents. He then used their cash to fund other business deals and cover his personal expenses.

The SEC claims Brogdon had been making payments to investors by borrowing funds through third parties, drawing down on personal credit lines, and using proceeds that came from other offerings. None of these sources were in line with the offering documents issued to investors. Brodgon is charged with violating securities laws’ antifraud provisions and other securities rules.

If you suspect your losses are because of broker fraud or investment adviser fraud, contact us today.

Barclays to pay $120 million in US Libor litigation: Lawyers, Business Standard, November 14, 2015

SEC Hits Sands Brothers With $1M Fine for Repeat Violation of Custody Rule, Think Advisor, November 19, 2015

Read the SEC Complaint Against Brogdon (PDF)