Articles Posted in Promissory Notes

The U.S. Securities and Exchange Commission has filed promissory note fraud charges against Onix Capital and it owner Albert Chang-Rajii.  The Miami-based asset management company and Chang are accused of bilking investors who put their money into promissory notes and start-ups, as well as of falsely portraying the Chilean national as an award-winning multi-millionaire “angel” investor who had graduated from Stanford University’a business school.

According to the regulator’s complaint, Chang and Onix Capital sold over $5.7M in promissory notes that they falsely claimed he had guaranteed and told investors that the notes themselves  “guaranteed” yearly returns of 12-19%. They also raised over $1.7M that Chang was supposed to invest in companies like Square, Snapchat and Uber.

The SEC said that, in truth, Onix Capital’s investment revenue was “non-existent” and Chang did not have the professional or educational background that he touted.  The Commission alleges that rather than use the funds as promised, the money went to Chang and to pay other investors.

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$10M Texas Ponzi Scam Solicited Over 100 Investors

Austin resident Robert Roland Langguth is sentenced to four years in federal prison for running a $10 million Texas Ponzi scam that solicited over 100 investors to become involved in real and bogus construction projects and investments. Often, the money brought in would go toward supporting the 71-year-old’s extravagant lifestyle.

Monthly dividends paid to investors were actually payments from newer investors, which is typical for a Ponzi scam. Last year, Langguth pled guilty to money laundering and wire fraud charges. Aside from prison time, he will pay more than $10 million in restitution to investors that were defrauded.

The Financial Industry Regulatory Authority has issued temporary cease-and-desist order against Fuad Ahmed, the president and CEO of Success Trade Securities, Inc., to stop his alleged financial fraud activities. It also put out a complaint against him and the online brokerage firm, charging them with promissory note fraud. The notes were issued by Success Trade, Inc. Ahmed is one of its majority owners. Success Trade Securities runs LowTrades and Just2Trades.

FINRA issued the TCDO over concerns that if it didn’t, investors’ assets and funds would continue to be misused. The SRO contends that the brokerage firm, its financial representatives, and Ahmed sold over $18M in promissory notes to nearly five dozen investors, including ex- and current NBA and NFL Athletes, while omitting or misrepresenting material facts, such as how they were raising $5 million via the selling of the notes or that the sales went over 300% above the original offering.

The majority of notes promised a 12.5-26% yearly interest rate payment monthly over three years. Also, Success Trade Securities and Ahmed allegedly did not disclose both how much the brokerage firm owed investors and that it couldn’t keep paying interest payments unless it brought it new investor money. The SRO believes that note sale proceeds went to unsecured loans to Ahmed, past investor payments, and firm operations.

The Securities and Exchange Commission has charged Daniel Frishberg, a Houston businessman and the host of Business Radio Network’s “The MoneyMan” show, with fraudulent conduct related to promissory note offerings that his investment advisory firm made to clients. Frishberg, who founded BizRadio and heads up Daniel Frishberg Financial Services (DFFS), has agreed to settle the Texas securities fraud charges with a $65,000 penalty. By settling, Frishberg is not denying or admitting to the alleged wrongdings. He has, however, agreed to an entry of permanent injunction and consented to a bar from associating with certain registered entities, including other investment advisers.

DFFS allegedly advised clients to invest in notes that BizRadio had issued. Some $11 million promissory notes were put out. The offering reportedly generated approximately $5.5 million between April 2008 and September 2009.

According to the SEC, Frishberg did not tell clients that his media company was in poor financial health or that the note offerings helped pay his salary at BizRadio. Instead, he allegedly approved high risk recommendations without properly disclosing the conflicts and risks. Frishberg also “personally benefited” from these investments.

Also offering the notes was Kaleta Capital Management, whose owner, Albert Fase Kaleta, jointly controls BizRadio with Frishberg. In 2009, Kaleta and his financial firm were charged with securities fraud. Frishberg is accused of knowing that prior complaints had been made about Kaleta and his handling of sales representations related to other investments yet still opting to have him recommend the promissory notes.

The SEC contends that Frishberg has violated the Investment Advisers Act of 1940’s Section 206(2). He also allegedly abetted and aided violations of Sections 206(1) and 206(2) of the Advisers Act.

Related Web Resources:
SEC Charges Houston-Area Businessman and Talk Radio “MoneyMan” for Fraudulent Conduct at Advisory Firm, SEC, March 25, 2011
SEC charges radio personality with fraud, Investment News, April 5, 2011
The Money Man Report

Investment Advisers Act

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Motion to Dismiss SEC Lawsuit Accusing Dallas Billionaire Brothers of $500,000 Securities Fraud Denied, Stockbroker Fraud Blog, April 1, 2011
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Dallas-Based Southwest Securities Settles for $500,000 FINRA Charges It Improperly Used Paid Consultants, Stockbroker Fraud Blog, March 17, 2011 Continue reading

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