October 17, 2014

Ex-Ameriprise Adviser Pleads Guilty To Nearly $1M Fraud

SusanWalker, an ex investment adviser with Ameriprise Financial Inc. (AMP), has pleaded guilty to bilking two dozen clients of $980,000. She stole the funds from clients between ’08 and ’13, using the money to cover her own spending, including costly vacations.

Walker is accused of setting up investment accounts under several customers’ names but without their consent. She took money from clients’ retirement and brokerage accounts, placed the funds into the accounts under her control, and took out the funds to spend as she pleased. Ameriprise has paid back the customers that were harmed.

The firm fired Walker and her mother Barbara Stark in early 2013. Stark is not charged in this criminal case.

In a separate but related order seeking civil damages, Walker is accused of making unsuitable investment recommendations to customers and taking client money to pay for her own expenses, including her certification with the Certified Financial Planner Board of Standards Inc.

The board suspended Walker certification last year after finding out that the Financial Industry Regulatory Authority barred her (and Stark) for not providing documents in the wake of allegations that client funds were misappropriated. The board permanently revoked Walker's certification this year.

The securities fraud was discovered two years ago during an inquiry by the Minnesota Attorney General's Office into an unrelated settlement involving annuity sales. The office discovered withdrawals had been made from a number of annuities products without the knowledge of the owners.

Securities Fraud
It is the investors that suffers most when a financial representative engages in fraud, especially when that individual has chosen to purposely steal funds from clients. At Shepherd Smith Edwards and Kantas, LTD LLP, our securities fraud lawyers are here to help our clients get their money back. We help elderly seniors, married couples, young professionals, high net worth individuals, institutional clients, and other investors seeking tor recover their losses.

Even if the government or prosecutors are pursuing a case against a fraudster, it is important that you have an experienced investment fraud lawyer representing your interests and fighting for the recovery of your stolen funds. Over the years, we have helped thousands of investors get their money back. You should contact our securities law firm right away and ask for your free case assessment.

Reporting a securities fraud not only benefits you but it could prevent others from becoming victims as well. Unfortunately, until an unethical investment adviser or broker is exposed, their financial schemes can continue to cause harm. Even when the fraud is discovered, the financial representative may keep perpetuating a scam. Fraudsters have even known to move to another firm where they go on to bilk more clients. Contact us online or call (800) 259-9010.

Ex-Ameriprise adviser pleads guilty to stealing nearly $1 million, InvestmentNews, October 16, 2014

Former Ameriprise adviser from Plymouth admits to swindling $1 million from clients, Star Tribune, October 18, 2014


More Blog Posts:
LPL Financial Fires Texas Branch Manager Over Selling Away Claims, Settles with Senior Investors in Massachusetts for $541,000 Over Faulty Variable Annuity Switches, Stockbroker Fraud Blog, October 15, 2014

Barclays to Pay $20M To Settle Libor Manipulation, Institutional Investor Securities Blog, October 14, 2014

UBS is Fined $3.6M, Plus Must Pay $1.7M in Restitution Over Closed-End Mutual Fund Sales, Stockbroker Fraud Blog, October 14, 2014

October 15, 2014

LPL Financial Fires Texas Branch Manager Over Selling Away Claims, Settles with Senior Investors in Massachusetts for $541,000 Over Faulty Variable Annuity Switches

According to his report on the central registration depository, LPL Financial (LPLA) branch manager James Bashaw was fired last month for allegedly engaging in selling away, which involves taking part in private securities transactions without written disclosure or approval from a brokerage firm, as well as borrowing from a client and taking part in a business transaction that created a possible conflict, again without obtaining the necessary firm approval or written disclosure.

Bashaw, also known as “Jeb” Bashaw, is considered one of the leading financial advisers in Texas. Barron's magazine ranks him as number one in the state with assets totaling $3.8 billion.

According to Investment News, while the CRD, which is the central licensing and registration system for the securities industries and regulators, provided these details regarding Bashaw’s termination, LPL has not elaborated, except to report on his BrokerCheck profile that the broker did not follow industry regulations and firm policies. Bashaw is now registered with Wunderlich Securities Inc.

In other LPL Financial news, the firm has reached a deal with Massachusetts regulators in which it will pay back elderly investors over $500,000 to resolve complaints related to switching variable annuities. The broker-dealer has admitted that certain annuity-switch transactions were performed without disclosing that there were fees for surrendering or cashing in the annuity.

Annuity switching occurs when a broker recommends that a client trade in an older annuity to purchase another one. Frequently, this can cost a customer while benefiting the financial representative.

The agreement with Massachusetts Secretary of State William Galvin’s office covers 157 transactions involving senior investors in the state. LPL reportedly now has new policies in place to make sure that customers get the mandated disclosures when there are transaction fees.

LPL Financial to reimburse annuity-switching fees to investors, Reuters, October 14, 2014

Selling away claims behind LPL's termination of James "Jeb" Bashaw
, Investment News, October 13, 2014

LPL Financial to pay back $541,000, Boston Globe, October 14, 2014


More Blog Posts:

Texas’ Wyly Brothers Ordered to pay More than $300M In Fraud Sanctions, Stockbroker Fraud Blog, September 28, 2014

FINRA Bars Former Raymond James Adviser for Elder Financial Fraud, Charges SWS Over Variable Annuity Supervision, Stockbroker Fraud Blog, October 6, 2014

LPL Financial Ordered to Pay $7.5M FINRA Fine Over E-Mail Failures, Institutional Investor Securities Blog, May 22, 2013

October 14, 2014

UBS is Fined $3.6M, Plus Must Pay $1.7M in Restitution Over Closed-End Mutual Fund Sales

UBS Financial Services Incorporated of Puerto Rico (UBS) has reached a settlement with the Commonwealth’s Office of the Commissioner of Financial Institutions (OCIF) over UBS’s offering and sale of closed-end mutual funds in Puerto Rico. As part of the agreement, UBS will pay a $3.5 million fine, as well as $1.7 million in restitution to 34 clients. As is typical with such settlements, UBS is not denying or admitting to any wrongdoing.

After examining UBS’s operations between the periods of 1/1/06 through 9/30/13, OCFI discovered that UBS had placed clients with conservative risk tolerances in high concentrations of Puerto Rico Closed-End Funds (PRCEF). OCIF further alleged that UBS recommended or allowed these clients to use “non-purpose” loans to buy more PRCEF, which should have never happened. OCFI also reported irregularities in the way some clients’ accounts were managed and said UBS had engaged in inadequate supervision and recordkeeping.

The clients that are entitled to restitution are primarily elderly investors with low net worth and conservative financial profiles. UBS is going to pay them almost $1.7 million in restitution. This offer has to be made within 45 days of the settlement’s execution. The $3.5 million penalty will go to the Securities Trading, Investor Education and Training Fund.

UBS is also required to enhance its supervision of six of its agents, who may have committed practices that were objectionable, for at least six months. UBS has agreed to reassess, and perhaps even modify, its procedures and policies to make sure the firm is complying with regulations. UBS also will review additional customers’ accounts with similar profiles as the ones affected by these claims to see if further action and restitution are required.

UBS Puerto Rico is one of the firms accused of making inappropriate recommendations to investors in Puerto Rico muni bonds. When the bonds started to fail last year, many investors suffered huge losses.

Our Puerto Rico bond fraud lawyers have been meeting with investors on the island and in the U.S. to see how we can help recover their losses. Please contact Shepherd Smith Edwards and Kantas, LTD LLP today for a free, no obligation consultation about your investment account.



UBS Settlement with OCIF


More Blog Posts:

UBS Wealth, OppenheimerFunds Take Financial Hit From Puerto Rico Muni Bonds, Stockbroker Fraud Blog, August 15, 2014

Investors Pursue UBS's Puerto Rico Brokerage Over Closed-End Bond Funds, Stockbroker Fraud Blog, July 23, 2014

Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt
, Institutional Investor Securities Blog, November 15, 2013

October 8, 2014

Securities Fraud: Ex-Ameriprise Adviser to Pay $3M for Ponzi Scam, Four Insurance Agents Allegedly Defrauded Senior Investors, and Trading in Nine Penny Stocks is Suspended

Former Ameriprise Adviser Ordered to Jail, Must Pay $3M Restitution
Oscar Donald Overbey Jr., an ex-Ameriprise Financial Services (AMP) financial adviser, must pay back the $3 million he allegedly stole from investors while operating a Ponzi scam. The 47-year-old has been sentenced to three and a half years behind bars.

Court documents say that from 1996 into 2007, Overbey stole about $4 million of client funds that he was supposed to invest. Instead, the money was used to pay earlier investors, cover his personal expenses, and pay off his gambling debts.

In July 2012, Overbey was indicted. He pleaded guilty to wire fraud felony charges last year. Overbey reportedly told a doctor that many of his brokerage clients were fellow gamblers.

The Financial Industry Regulatory Authority barred him from the industry in 2007. Ameriprise fired him. It has since paid back the clients that were affected by Overbey’s fraud.

Insurance Agents Face SEC Charges Alleging Elder Financial Fraud
The U.S. Securities and Exchange Commission is charging four insurance agents over their involvement in a multi-million dollar securities fraud that targeted senior investors. The elder financial fraud charges come almost a year after the regulator filed charges against Gary C. Snisky for orchestrating the scheme and bringing in insurance agents to solicit investors.

The financial scam raised about $4.3 million over 18 months. Now, the SEC is going after insurance agents Kenneth C. Meissner, Mark S. Tomich, James Doug Scott, and David C. Sorrells for soliciting funds even though they weren’t registered as a broker-dealer with the Commission.

The fraud primarily targeted annuity holders that were retired. The insurance agents sold interests in Arete LLC, which Snisky controlled. Investors were purportedly told that their money would be used to buy discounted agency bonds that were backed by the government. Instead, Snisky misappropriated about $2.8 million of their money.

Microcrap Fraud Probe Leads to Trading Suspension in Nine Penny Stocks
The SEC has suspended trading in nine penny stocks. The move is an effort to battle microcap fraud. The affected companies include Xumanii International Holdings Corp., All Grade Mining Inc., Solar Thin Films Inc., Global Green Inc., Bluforest Inc., mLight Tech Inc., DHS Holding Co., Inova Technology Inc., and Essential Innovations Technology Corp.

The SEC can elect to suspend trading in a stock if it believes that doing so is necessary to protect investors and the public. The regulator typically cannot announce in advance that a suspension is in the works because this could hinder its investigative efforts.

Ex-Ameriprise adviser gets jail time for using client money to pay gambling debts, Investment News, October 7, 2014

SEC Charges Four Insurance Agents in Securities Fraud Targeting Elderly Investors, SEC, September 26, 2014

Penny Stocks Trading Suspension Order, SEC (PDF)


More Blog Posts:

FINRA Bars Former Raymond James Adviser for Elder Financial Fraud, Charges SWS Over Variable Annuity Supervision, Stockbroker Fraud Blog, October 7, 2014

Former Axa Advisors Broker Faces SEC Charges Over Alleged $1.5M Ponzi Scam, Stockbroker Fraud Blog, September 30, 2014

Shareholder’s $40B Class Action Securities Lawsuit Over AIG Bailout Goes to Trial, Institutional Investor Securities Blog, September 29, 2014

October 6, 2014

FINRA Bars Former Raymond James Adviser for Elder Financial Fraud, Charges SWS Over Variable Annuity Supervision

The Financial Industry Regulatory Authority has barred Jo Ellen Fischer, an independent financial adviser with Raymond James Services Inc. (RJF), for purportedly stealing nearly $1 million from a 95-year-old client. At the time, Fisher worked for Peoples Bancorp.

According to the self-regulatory organization, from July to December 2013, Fisher converted $924,750 from the elderly customer’s trust without permission. She did this by moving funds and securities into a brokerage account under her daughter’s name. Fisher then liquidated securities and used the money to cover her personal spending, including two Rolexes, motor vehicles, a 2-carat diamond ring, and other expenses.

FINRA says that Fisher claimed that the elderly client was her daughter’s godfather and he wanted her to have the money when she was older. The SRO, however, contends that Fisher falsified documents regarding this matter. She has agreed to the bar without denying or admitting to the findings alleging elder financial fraud.

Raymond James, which terminated Fisher's registration earlier this year, is cooperating with investigators. The financial firm has filed its own action against her in federal court to get back the money she purportedly took. Raymond James has already paid back the investor.

In other FINRA-related news, the SRO is charging SWS Financial Services with approving variable annuity applications without conducting principal review to make sure they were suitable. The agency’s enforcement department claims that from 9/09 to 5/11 the firm did not have the required supervisory systems and written procedures in place for VA transactions.

SWS is accused of not conducting adequate supervisory reviews of variable annuity deals, failing to register principal reviews of VAs prior to turning the applications over to the insurer, not setting up and documenting a training plan for supervisory review of VA deals, and failing to establish surveillance procedures that could identify VA exchanges that were not appropriate.

FINRA says that during the time of these violations, variable annuity sales comprised up to 20% of the firm’s total revenue. It wants disciplinary action, including monetary sanctions, as well as an order mandating that SWS pay for the proceeding costs.

Finra Bars Ex-Raymond James Adviser Over Alleged Account Theft, The Wall Street Journal, October 3, 2014

Finra charges SWS with improper supervision of VA transactions, Investment News, October 2, 2014


More Blog Posts:

Former Axa Advisors Broker Faces SEC Charges Over Alleged $1.5M Ponzi Scam, Stockbroker Fraud Blog, September 30, 2014

DOJ’s Fund for Madoff Victims Has Received 51,700 Claims Worth $40B, Institutional Investor Securities Blog, May 14, 2014

Resource Horizons Group’s Future Hangs in Balance Following $4M FINRA Arbitration Award, Stockbroker Fraud Blog, September 25, 2014

September 30, 2014

Former Axa Advisors Broker Faces SEC Charges Over Alleged $1.5M Ponzi Scam

The SEC is charging Dennis Wright, an ex-Axa Advisors broker, with operating a Ponzi scam for 14 years and bilking customers of $1.5 million. According to the regulator, from 1998 and into 2012, Wright allegedly persuaded at least 28 customers to take money out of Axa variable annuity accounts under the guise that he would move the money to mutual fund accounts that had higher returns and also were run by the brokerage firm.

The Commission claims that rather than invest clients’ money, what ended up happening is that Wright put the money into a bank account under his control and used the funds to pay other investors. The SEC says that Wright purposely manipulated Axa Advisor clients so he could steal their savings. Alleged victims included members of Wright’s community, including childhood friends, and unsophisticated investors.

Axa Advisors let Wright go in 2012 after the firm found out about the alleged fraud. Axa has since paid back the customers whose funds were misappropriated.

In other Ponzi scam news, the SEC has filed charges against eAdGear Holdings Limited, which is based in Hong Kong, eAdGear, Inc., which is in California, Qian Cathy Zhang, Charles S. Wang, and Francis Y. Yuen of running an international Ponzi and pyramid scam that raised over $129 million. Investors are from the U.S., Taiwan, and China.

The regulator claims that the companies and its operators claimed to be running a profitable Internet marketing company when really it was a scam targeting Chinese communities. Investors’ money was allegedly used to pay off earlier investors and to buy million-dollar homes for Zhang, Wang, and Yuen.

Bogus websites were purportedly created on eAdGear’s site to make it look as if there were real paying customers and investors were getting revenue distributions, when, in fact, the “revenue” was, in actuality, investor money. The companies were not making money from their products and services.

Also facing SEC Ponzi scam charges is Joseph Laurer, the former president of the AARP’s South Dade Chapter in Florida. The regulator is accusing him of raising $4.6 million from primarily local investors.

The SEC says that Laurer told investors he was going to place their money into AAA-rated corporate and government bonds that had a guaranteed fixed income and would bring no risk to their principal balance. However, he hardly invested any money into the securities. Instead, he purportedly used their funds to pay for his own personal spending and pay earlier investors their returns.

Laurer allegedly ran the Florida Ponzi scam from 2004 until his death earlier this year. His widow is the relief defendant. The Comission wants to get back the money and pay back investors.

Former AARP leader in Miami-Dade ran offshore Ponzi scheme, SEC charges, South Florida Business Journal, September 16, 2014

NJ couple accused of operating $129 million pyramid scheme, NJ.com, September 27, 2014

SEC charges ex-Axa broker with running $1.5 million Ponzi, InvestmentNews, October 1, 2014


More Blog Posts:
SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, September 11, 2014

DOJ’s Fund for Madoff Victims Has Received 51,700 Claims Worth $40B, Institutional Investor Securities Blog, May 14, 2014

Resource Horizons Group’s Future Hangs in Balance Following $4M FINRA Arbitration Award, Stockbroker Fraud Blog, September 25, 2014

September 29, 2014

SEC Approves FINRA Arbitration Fees, SRO Proposes Rule For CARDS

The U.S. Securities and Exchange Commission has approved a Financial Industry Regulatory Authority Inc. proposal to up the pay for arbitrators. The rule change will increase how much it will cost to file securities arbitration claims, as well as processing fees, surcharge, and hearing session fees for bigger cases.

The changes would only impact claims involving over $250,000, with fees per hearing session going up by $100 to $300 depending on how big the claim. Filing fees would go up 10% to 25%, again depending on the claim’s size.

FINRA has not upped its fees since 1999. Under the proposed rule, arbitrators of these larger cases would get paid $300 for every hearing session, while the chairman would get another $125 a day. With the proposal, the self-regulatory organization would be bringing in $4 million to $5.6 million annually.

For the most part, the securities industry has supported the proposal, which should hopefully improve the quality of the arbitration process at FINRA. The regulator said arbitrators have regularly complained about how much they were paid, even skipping or postponing their duties when other opportunities that paid more arose. The SRO is hoping the new fees will enhance its arbitration recruiting efforts.

Also, FINRA has just issued new guidelines for a proposed computerized method to keep track of transactions and balances in brokerage accounts. The system, known as CARDS, for the Comprehensive Automated Risk Data System, is supposed to allow the regulator to identify and quickly deal with suspect activity and high-risk areas that it can’t easily detect under its current programs for examination and surveillance.

CARDS would go into effect via two stages. The first one would mandate that clearing and carrying firms periodically turn in automated, standardized data about their records and books related to securities accounts, including those that they clear. Stage two would require fully disclosed introducing firms to turn in specific data elements that are account profile-related to FINRA. Customers’ personally identifiable information would not be included among this information.

CARDS will ultimately speed up the detection process via automation. With this system, the regulator hopes to be able to run computerized analytic checks at the over 4,000 broker-dealers it oversees. Some have expressed worry that CARDS and similar systems could make it easy for data thieves to access information about what investors are holding.

Commentators have until December 1 to chime in. The CARDS proposal is an update of an initial proposal that FINRA put out last year.

The regulator says that CARDS will cost between $8 million to $12 million over three years to develop its systems and technology. Costs to certain brokers to develop the system could run from $390K to $8.33 million. Brokers had expressed worry that the new system could be too expensive for them.

SEC signs off on Finra arbitration fee increases, Investment News, September 30, 2014

FINRA Solicits Comment on Proposed Rule to Implement CARDS, FINRA, September 30, 2014


MORE BLOG POSTS:
SEC News: Regulator to Review Rule Change on New Hire Background Checks, Prepares Mutual Fund Regulations, and is Defendant of Oxfam America Lawsuit, Institutional Investor Securities Blog, September 20, 2014

FINRA Bars Ex-Wells Fargo Broker From Industry For Allegedly Bilking Customers, Expels HFP Capital Markets LLC for Securities Fraud, Stockbroker Fraud Blog, September 19, 2014

FINRA Fines Minneapolis Broker-Dealer $1M for Inadequate Supervision of Penny Stocks, Stockbroker Fraud Blog, September 13, 2014

September 28, 2014

Texas’ Wyly Brothers Ordered to pay More than $300M In Fraud Sanctions

A federal judge has ordered Texas businessman Sam Wiley and the estate of his deceased brother Charles Wiley to pay $187.7 million in disgorgement plus prejudgment interest—bringing the total sanctions to over $300 million for their involvement in an offshore scam. The brothers were found liable on civil securities fraud charges accusing them of using offshore trusts to conceal stock sales, resulting in $553 million in profits.

The U.S. Securities and Exchange Commission had wanted the Wylys to pay $729 million in sanctions, including for all unpaid taxes on the profits made from the scheme plus interest. The government said that the Wylys used their improper gains to buy $100 million in real estate and spent tens of million dollars on luxury spending and charitable donations.

Meantime, lawyers for the Wyly brothers argued that the trusts were established for estate planning and tax purposes but that the two men did not control them. Over 700 transactions were sold in four companies, none of which the two men disclosed in regulatory findings. The Wyly brothers were insiders in the companies involved.

According to court documented submitted by the SEC, after he was warned that the brothers’ stance regarding the trusts’ tax actions was high risk and aggressive for tax purposes, Sam Wiley says that if the internal revenue ever challenged him he was willing to go to court for years. A jury found the brothers liable for keeping the trusts and subsidiaries going on the Isle of Man, in addition to an entity on the Cayman Islands.

In a recent statement, SEC Enforcement Division Director Andrew Ceresney said that the regulator was committed to sussing out wrongdoing and holding persons accountable for securities law violations regardless of how well concealed or complex the financial scam.

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

'Staggering' Sanctions Slapped On Wyly Brothers In Offshore Case
, Forbes, September 25, 2014

U.S. SEC wins hundreds of millions in Wyly fraud case, Reuters, September 25, 2014


More Blog Posts:
Man to Pay $40.4M for Texas Securities Fraud Involving Bitcoin Ponzi Scam, Stockbroker Fraud Blog, September 20, 2014

Texas-Based Halliburton Settles Oil Spill Lawsuit for $1.1B, Institutional Investor Securities Blog, September 2, 2014

SEC Files Charges in $4.5M Houston-Based Pump-and-Dump Scam, Stockbroker Fraud Blog, August 18, 2014

September 25, 2014

Resource Horizons Group’s Future Hangs in Balance Following $4M FINRA Arbitration Award

Resource Horizons Group, a regional brokerage firm and investment adviser, may no longer be able to stay in business after a $4 million Financial Industry Regulatory Authority arbitration award was issued against it. The self-regulatory organization blames the firm for almost $3.5 million in investor losses after Robert Gist, one of the firm’s brokers, allegedly took the money. Part of the award is $1 million in punitive damages.

Last year, Gist consented to pay $5.4 million to settle SEC charges claiming that he converted about that much from at least 32 customers for his own use over a ten-year period. He went through Gist, Kennedy & Associates, Inc., which was an unregistered entity with no connection to Resource Horizons, in that financial scam.

Resource Horizons hired Gist in 2001. Even before that there already were a number of customers disputes and other disclosures on his record. Both the SEC and FINRA have now barred Gist from the securities industry.

The claimants that filed a case against Resource Horizon and three firm executives include a family trust and six individuals. Among their allegations was a claim alleging inadequate supervision.

Resource Horizons reportedly may not have enough money to pay the arbitration award. An audited filing with the Securities and Exchange Commission notes that the firm’s net income in 2013 was $286,220 and its excess net capital is only $468,628 over the $100,000 it is obligated to keep to satisfy regulatory requirements.

If Resource Horizons cannot pay the securities arbitration award, it will need to note the amount as a liability. This would get rid of its excess capital and put the firm under the $100,00 net capital requirement.

Once a financial firm drops under net capital requirements, it can no longer conduct business and must notify customers that they must now put their orders straight through to its clearing firm.

Brokerage, Execs Ordered to Pay $3.9M in Bad-Broker Case, WSJ.com, September 24, 2014

B-D's fate uncertain after $4M arbitration award, Investment News, September 25, 2014


More Blog Posts:
SEC News: Regulator Grants $30M Whistleblower Award and Charges Washington Investment Advisory Firm $600K for Undisclosed Principal Transaction, False Advertising, Stockbroker Fraud Blog, September 23, 2014

Man to Pay $40.4M for Texas Securities Fraud Involving Bitcoin Ponzi Scam, Stockbroker Fraud Blog, September 20, 2014

SEC Investigates Pimco Exchange-Traded Fund for Artificial Inflation, Institutional Investor Securities Blog, September 25, 2014

September 23, 2014

SEC News: Regulator Grants $30M Whistleblower Award and Charges Washington Investment Advisory Firm $600K for Undisclosed Principal Transaction, False Advertising

Whistleblower to Get Over $30M Award in SEC Case
In its largest whistleblower award yet, the U.S. Securities and Exchange Commission will pay a bounty of over $30 million to an informant. Seeing that a whistleblower may be entitled to 10-30% of the amount recovered under the Dodd-Frank program, if the quality, unique information the person provided led to an enforcement action resulting in sanctions of over $1 million, a huge sum was obviously recovered.

In this particular case, the whistleblower resides abroad. Andrew Ceresney, SEC Enforcement Division Director, said that the individual brought the agency information about a fraud that otherwise would have been very hard to detect. He stated that whistleblowers anywhere in the world should see this latest award as incentive to report possible violations involving U.S. securities fraud.

The largest whistleblower award prior to this one was $14 million. That case targeted foreigners that invested in a real estate scam in the U.S without their knowledge. The investors were hoping to qualify for a program that gives residency green cards for investment efforts that create jobs domestically.

Strategic Capital Group LLC Settles SEC Charges for $600K
The SEC is charging a Tacoma-Washington area investment advisory firm with involvement in hundreds of principal transactions via an affiliated brokerage firm and not telling clients or getting their required consent. Strategic Capital Group is paying nearly $600,000 to resolve the charges. N. Gary Price, its CEO, is accused of causing the violations. He will pay $50,000 to settle the regulator’s charges against him.

According to Commission, Strategic Capital took part in over 1,100 principal transactions via affiliate RP Capital LLC, without the requisite customer consent. It also did not try to obtain best execution for these transactions. Meantime, Price put his signature on regulatory filings that falsely stated that the firm did not take part in principal transactions.

Principal transactions can create potential conflicts between the interests of the client and the adviser. Because of this advisors must disclose in writing any conflicted role or financial interest when giving a client advise on the trade’s other side, as well as get the latter’s consent.

The SEC also accused Strategic Capital of giving prospective investors misleading and false advertisements and not implementing the correct compliance procedures. Without admitting or denying the agency’s findings, the investment advisory firm and Price consented to cease and desist from causing or committing future violations of the Investment Advisers Act of 1940’s provisions involving principal transactions, antifraud, compliance, advertising, and reporting.

Contact our SEC fraud lawyers if you suspect that your financial losses are due to securities fraud , or some other form of financial misconduct, or if you need to speak with a securities whistleblower lawyer.

The SEC Order Regarding Whistleblower Award (PDF)

The SEC Order in the Strategic Capital Group Case (PDF)


More Blog Posts:
SEC Charges Immigration Attorneys with Securities Fraud Involving EB-5 Immigration investor Program, Stockbroker Fraud Blog, September 4, 2014

T.J. Malone’s Lincolnshire Management Settles with SEC for $2.3M Over Purportedly Improper Allocations That Cost Its Funds, Institutional Investor Securities Blog, September 23, 2014

Pennsylvania Private Equity Firm Settles SEC Charges Over “Pay to Play” Violations Related to Political Campaign Contributions, Institutional Investor Securities Blog, June 23, 2014

September 20, 2014

Man to Pay $40.4M for Texas Securities Fraud Involving Bitcoin Ponzi Scam

Trendon T. Shavers, who is accused of operating a Texas Ponzi scam involving a Bitcoin scheme he operated from his residence must pay more than $40.4 million. The SEC filed a securities fraud case against him and his company Bitcoin Savings & Trust last year and sought disgorgement.

According to the regulator, Shavers, a Texas resident, raised more than 700,000 bitcoins while promising investors interest as high as 7% weekly. The allegedly fraudulent activities lasted from November 2011 through August 2012 when the Ponzi scam collapsed.

In a promo that he posted on online, Shavers solicited lenders, offering 1% interest daily for loans involving at least 50 bitcoins. He also published posts touting nearly zero risk, claiming that the business was doing exceptionally well. When his Texas securities scam failed, Shavers showed preference to longtime investors and friends when giving out redemptions.

Shavers admitted to using a “reserve fund” as part of his Ponzi operation to honor investor withdrawals when he couldn’t make enough returns from the supposed investments. He also allegedly pocketed some of the bitcoins and spent part of investors’ money on his own expenses, including casino visits.

The judge overruled his argument that the court lacked subject matter jurisdiction because bitcoins are not actual cash but virtual currency. He said that because Bitcoin can be used as money and exchanged for conventional currencies, it is a type of money.

The judge found that investors lost more than 365,000 bitcoins, valued at around $149 million. He granted the Commission’s motion for summary judgment was granted.

Please contact our Texas securities law firm if you believe that you were the victim of a Ponzi scam or any other kind of financial fraud.

Texas Man Must Pony Up $40.7M for Bitcoin Scam, Courthouse News, September 19, 2014

Read the SEC Complaint (PDF)


More Blog Posts:
Investment Advisory Firm Based in Houston, Texas Charged with Securities Fraud Involving Conflicts of Interest, Stockbroker Fraud Law Firm, September 2, 2014

Texas-Based Halliburton Settles Oil Spill Lawsuit for $1.1B, Institutional Investor Securities Blog, September 2, 2014

SEC Files Charges in $4.5M Houston-Based Pump-and-Dump Scam, Stockbroker Fraud Blog, August 18, 2014

September 19, 2014

FINRA Bars Ex-Wells Fargo Broker From Industry For Allegedly Bilking Customers, Expels HFP Capital Markets LLC for Securities Fraud

The Financial Industry Regulatory Authority has barred a former Wells Fargo (WFC) registered representative from the brokerage industry. According to the self-regulatory organization, Ane S. Plate, who previously worked with Wells Fargo Advisors Financial Network in Florida, allegedly made fifteen unauthorized trades in a joint brokerage account of two customers between October 2013 and April 2014. The transactions resulted in $176,080 of cash proceeds, of which Plate is accused of pocketing $132,358.

The former Wells Fargo broker is also accused of setting up bi-weekly transfers from the brokerage account to a bank account that was in the name of one of her relatives. She then allegedly moved $7,700 to that account between December 2013 and May 2014.

Plate, who was working with Wachovia Securities when Wells Fargo acquired that firm, has since been fired after the latter discovered the purported theft. FINRA’s BrokerCheck reports that the customers that were harmed were fully reimbursed for the amount taken from them.

Plate, who settled the FINRA charges, is not denying or admitting to the allegations. She has, however, consented to an entry of the regulator’s findings.

FINRA also recently expelled a financial firm from FINRA membership, this for the purportedly fraudulent sale of about $3 million of senior secured zero-coupon notes. HFP Capital Markets LLC will now have to pay $2,980,000 plus interest in customer restitution.

The financial firm is accused of selling private offerings of the notes to customers while knowingly leaving out or misrepresenting material facts in the offering and sales. The SRO says the notes were misrepresented as collateralized by certain barrels of leftover mining materials that were valuable enough to secure an investment, when the ore concentrate was actually worthless.

FINRA is also accusing HFP Capital Markets of not disclosing material facts about the management and ownership of the issuer and about the way the proceeds from the offering were utilized. The firm also purportedly disregarded red flags and did not conduct sufficient due diligence on the individuals involved, the offering, or the third parties that were presented as critical strategic partners.

Some customers recovered their money in the form of replacement transactions after complaining to the firm, but everyone else lost their funds. Now, HFP Capital Markets is settling without denying or admitting to the findings.

FINRA also recently censured Felix Investments LLC, which is based in New Jersey, for sending misleading, unwarranted, and exaggerated claims or statements to potential investors of a fund via email. The communications purportedly did not note the possible risks or provide comprehensive descriptions of the fund.

Now, Felix Investments has to submit all retail communications, per FINRA Rule 2210’s definition, with the agency at least 10 days before use and pay a $300,000 fine. The firm’s principal, Susan Mindlin Diamond, must pay a $10,000 fine and serve a four-month suspension. Meantime financial representative Frank Gregory Mazzola, who is accused of sending the emails, is barred from associating with any FINRA member.

Other FINRA findings against Felix Investments and Diamond include inadequate supervision of Mazzola, even after an AWC was put out against him, and failure to put into place a written anti-money laundering program to keep Felix in compliance with the Bank Secrecy Act and other regulations.

Felix Investments, Mazzola, and Diamond settled with FINRA without denying or admitting to the findings.

Former Wells Fargo Advisor Barred From Brokerage Industry, Bank Investment Consultant

FINRA Enforcement: HFP Capital Markets Expelled From FINRA for Note Fraud, ThinkAdvisor, September 5, 2014

FINRA


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FINRA Headlines: SRO Considers Revised Broker Bonus Plan, To Discuss Potential Dark Pool Rules, May Instigate Civil Action Against Wells Fargo, &Warns Investors About Frontier Markets, Institutional Investor Securities Blog, September 12, 2014