August 17, 2016

Securities Fraud News: Hedge Fund Manager Accused of Securities Fraud Involving Payoffs to the Terminally Ill, SEC Halts Trading in Neruomama Shares, and Commodity Pool Fraud Leads to More than $10M in Penalties and Restitution

Investment Advisor Firm Accused of Paying Off Terminally Ill Patients to Commit Fraud
The SEC has filed fraud charges against Donald Lathen and his Eden Arc Capital Management. Lathen is accused of recruiting at least 60 individuals who had less than six months to live and agreeing to pay them $10K each for the use of their names on joint brokerage accounts. When one of these individuals would die, he would allegedly redeem the investments by falsely representing that he and the terminally individual person were joint account holders.

Lathen recruited the terminally ill patients through contacts he had at hospices and nursing homes. In reality, it was Lathen’s hedge fund that owned the option investments.

As a result, of the purported omissions and misrepresentations, issuers paid over $100M in early redemptions. Lathen is accused of violating the custody rule by not properly putting the securities and money from the hedge fund in an account under the name of the fund or in one that held only client money and securities.


SEC Stops Trading in Neromamam Ltd.
The SEC has stopped the trading of Neuromama Ltd. (NERO) shares. The shares trade on the mostly unregulated over-the-counter markets and the regulator is concerned about transactions that may be “potentially manipulative, as well as other red flags that have purportedly been cropping up for years.

Neruomama’s paper value went up times four to $35B this year despite not much volume. The company’s shares went up by four times to $56/share. (On January 15, ’14, its value was $4.73B.)

Continue reading "Securities Fraud News: Hedge Fund Manager Accused of Securities Fraud Involving Payoffs to the Terminally Ill, SEC Halts Trading in Neruomama Shares, and Commodity Pool Fraud Leads to More than $10M in Penalties and Restitution" »

August 10, 2016

SEC Charges Ex-Philadelphia Eagles Football Player With $10M Fraud

Merrill Roberts Jr., an ex-Philadelphia Eagles football player, is charged with financial fraud. According to the Securities and Exchange Commission, Robertson bilked investors in a $10M scam.

The SEC claims that Robertson, Sherman Vaughn Jr. and their Cavalier Union Investments LLC promised investors they would invest in diversified holdings. Instead, they took nearly $6M of investors’ money to cover their own spending and pay earlier investors. Expenditures purportedly included cars, luxury items, spa visits, family vacations, and educational expenses.

The two men are accused of claiming that the unregistered debt securities they were selling were safe and would generate up to 20%. They also purportedly told people that experienced invest advisers were running Cavalier’s investment funds when there were no advisers or funds.

The investment firm, said the SEC was “functionally insolvent” soon after it was set up, yet the defendants allegedly concealed this from prospective investors and depended on the latter’s money to stay in business. The government said that Cavalier only invested in restaurants and all of them failed.

Continue reading "SEC Charges Ex-Philadelphia Eagles Football Player With $10M Fraud" »

August 3, 2016

Securities Fraud: Unregistered Representatives Bilk Investors of Over $5M & Go Shopping, Broker to Go to Prison Over $131M Market Manipulation Scam, and an Illinois Man is Convicted in $20M Scheme

SEC Files Fraud Charges Against Unregistered Representatives in $5M Fraud
The U.S. Securities and Exchange Commission has obtained an asset freeze against Matthew White, Daniel Merandi, and Rodney Zehner for alleged financial fraud. The three men are not registered to sell investments. They are accused of raising over $5M from investors and spending the money on expensive shopping expeditions.

According to the SEC, Merandi, White, and Zehner fraudulently issued $1B in unsecured corporate bonds using their shell company. They said the funds would go toward developing a resort. Although they never raised enough money to begin the project, they took $5.6M that they did raise from investors and went shopping at Gucci, Prada, Saks Fifth Avenue, Versace, and Louis Vuitton. The men allegedly conducted bogus transactions to raise the bond’s price even though the securities were expired and had no value.

The Commission is accusing Merandi, White, Zehner, and their companies of violating the Securities Act of 1933’s Section 17(a) antifraud provision, the Exchange Act of 1934’s Section 10(b), and Rule10b-5. It wants permanent injunctions, penalties, and disgorgement.


Broker Pleads Guilty to Fraud Involving $131M Market Manipulation Scam
Registered broker Naveed Khan has pleaded guilty to securities fraud. Khan faces up to 20 years behind bars for his involvement in a $131M pump-and-dump scam that involved the market manipulation of ForceField Energy Inc. (FNRG).

Between 1/09 and 4/15, the defendant and others sought to bilk ForceField investors. The fraudsters are accused of using nominees to sell and buy the LED company’s stock without notifying current investors and potential ones, orchestrating trading to make it seem as if the public was interested in ForceField’s stock, and hiding payments made to brokerage firms and stock promoters. These broker-dealers purportedly marketed and sold the stock under the guise of being independent.

Continue reading "Securities Fraud: Unregistered Representatives Bilk Investors of Over $5M & Go Shopping, Broker to Go to Prison Over $131M Market Manipulation Scam, and an Illinois Man is Convicted in $20M Scheme" »

July 27, 2016

SEC Stops $5M Fraud, Ex-Investment Adviser Faces Criminal Charges, Another Pleads Guilty, and a Broker is Barred for Bilking Elderly Customer Through Variable Annuities

SEC Wins Asset Freeze Against Two Ex-Brokers in Alleged $5M Fraud
The Securities and Exchange Commission has obtained an asset freeze from a court to stop the alleged ongoing fraud by ex-brokers Douglas Albert Dyer and James Hugh Brennan III. They are accused of raising over $5M from investors and improperly using their money. Both men have disciplinary histories.

According to the Commission, since 2008 Dyer and Brennan had sold purported shares in several companies to over 240 investors but did not register the stock. They allegedly moved this money into their personal accounts or to their wives’ accounts. They also purportedly did not disclose that Brennan was banned from the brokerage industry or that Dyer had been fined and suspended for unrelated unauthorized transactions involving customer accounts.

Also named in the SEC case is Broad Street Ventures, which is Brennan and Dyer’s company. Their wives are relief defendants. The regulator wants ill-gotten gains, interest, penalties, and permanent injunctions.

Ex-Investment Adviser Faces Criminal Charges for Allegedly Stealing Over $5.1M from Clients
Bradley Smegal is charged with securities fraud. The ex-Washington State investment advisor is accused of stealing over $5.1M from at least 14 clients.

Prosecutors say that between 8/07 and 1/13 Smegal persuaded clients to invest with entities that he said “guaranteed” specific return rates and were “conservative.” According to court documents, he failed to disclose he had a stake in the investments, and he moved $825,00K of the funds into his own account.

Continue reading " SEC Stops $5M Fraud, Ex-Investment Adviser Faces Criminal Charges, Another Pleads Guilty, and a Broker is Barred for Bilking Elderly Customer Through Variable Annuities" »

July 7, 2016

Rhode Island Investment Adviser to Plead Guilty in $21M Ponzi Scam

The U.S. Attorney’s Office has issued a statement announcing that Patrick E. Churchville, the president and owner of ClearPath Wealth Management, will plead guilty to one count of tax fraud and numerous counts of wire fraud related to the running a $21M Ponzi scam. According to prosecutors, Churchville also used $2.5M of investor money to buy a house and neglected to pay over $820K of his federal income taxes.

Court documents report that a federal probe determined that from ‘08 through October ’11 the Rhode Island investment adviser and his firm invested about $18M in JER Receivables on behalf of investors. The government said that in 6/10, Churchville found out that the investments were no longer rendering returns and that ClearPath had been the subject of misleading and fraudulent representations by JER principals. However, instead of notifying clients that he lost millions of dollars of their money, he tried to hide the losses while continuing to collect investment fees.

As a result, Churchville misappropriated about $21M of investor money, misusing their funds while bringing in money from new investors. For example, he used investor money to repay JER investors while pretending that the funds were investment returns. He also lied when he told investors that past investments with JER Receivables had resulted in high return rates.

The government’s probe, conducted by the FBI, the U.S. Attorney’s office, and the IRS Criminal Investigation, also found that Churchville set up a scam in which he used investor money as collateral and, without their permission, used the funds to help him get $2.5M to buy a home. He did not report that money as income on his personal tax returns, hence the more than $820K nonpayment of his taxes.

Continue reading "Rhode Island Investment Adviser to Plead Guilty in $21M Ponzi Scam" »

June 8, 2016

Morgan Stanley and E*Trade Securities Face Penalties for Inadequate Customer Information Protection

The Securities and Exchange Commission says that Morgan Stanley Smith Barney LLC (MS) will pay a $1M penalty to resolve charges involving its purported failure to protect customer data. Some of this information was hacked and violators attempted to sell the data online.

According to the regulator, the firm did not put into place written policies and procedures that were designed in a manner reasonable enough to protect customer information. Because of this, said the SEC, from ’11 to ’14, former Morgan Stanley employee Galen J. Marsh was able to access without permission information regarding approximately 730,000 accounts and move them to his own server. This made it possible for third parties to access and hack the information from there.

The Commission said that Morgan Stanley had two internal portals that made it possible for employees such as Marsh to access confidential customer account information and it was for these internal applications that the firm lacked the needed authorization modules that would have restricted which employees could see this information. This deficiency existed for over a decade.

It was just last week that the Financial Industry Regulatory Authority said that it was censuring and fining E*Trade Securities LLC for supervisory violations related to customer order information protection and for not performing sufficient review of the quality of customer order executions. As a firm that offers online services for securities investing and trading to retail customers, E*Trade is supposed to evaluate the competing markets that it routes customer orders to, including exchange and non-exchange market centers. Firms such as E*Trade are also supposed to conduct periodic and stringent reviews of the quality of customer order executions to see if there are any differences among the markets, which is why the firm set up a Best Execution Committee to do this job.

Continue reading "Morgan Stanley and E*Trade Securities Face Penalties for Inadequate Customer Information Protection" »

June 4, 2016

SEC & Fraud Cases: Ponzi Scam Targeting Middle Class Investors is Stopped, NY-Based Forex Trader is Accused of Bilking Ex-Classmates, Family, and Friends, and NC Investment Adviser is Sued Over $11.5M Real Estate-Related Scheme

SEC Stops Ponzi Scam Involving Pre-IPO Stocks and Middle Class Investors
The U.S. Securities and Exchange Commission is charging Jaswant Gill and Javier Rios with fraud. The regulator claims that the two men and their investment firm, JSG Capital Investments, targeted middle-class investors through a Ponzi scam in which they touted purportedly huge returns through pro-IPO stock in renowned companies such as Airbnb, Alibaba, and Uber.

Gill and Rios are accused of pocketing at least $2.8M in investor money for their own lavish spending instead of investing the money in the pre-IPO shares. Funds of new investors were used to pay “returns” to earlier investors.

Gill allegedly touted fake credentials. He, Rios, and their firm are not registered with the Commission or with a state regulator.

The SEC said that in total the two investment advisers raised $10M through their company and related entities. They are said to have promised these retail investors access to investment opportunities that were typically only available to “one-percenters.” They also guaranteed yearly returns as high as 60%.

The U.S. Attorney’s Office for the Northern District of California has filed a parallel criminal case against Rios and Gill.


Trader Accused of Bilking Friends and Family of Millions of Dollars
The SEC is suing Haena Park for allegedly defrauding friends, her ex-Harvard classmates, family members, and other individuals of millions of dollars. Park is accused of using investor funds and making misrepresentations about her investment history, as well about the profits the investments were supposed to have made.

Since 2012, Park has raised at least $14M from over 30 investors, sustaining $16M in trading losses in the process.

Continue reading "SEC & Fraud Cases: Ponzi Scam Targeting Middle Class Investors is Stopped, NY-Based Forex Trader is Accused of Bilking Ex-Classmates, Family, and Friends, and NC Investment Adviser is Sued Over $11.5M Real Estate-Related Scheme" »

June 3, 2016

Securities Cases: Stephens Inc. to Pay $900K Fine, FINRA Bans Ex-Wells Fargo Broker, And Former State Street Executive is Accused of Charging Hidden Fees

SEC Files Fraud Charges Against Former State Street Executive
The U.S. Securities and Exchange Commission is filing fraud charges against ex-State Street Corp. (STT) executive Ross McClellan. According to the regulator, McLellan was one of a number of people who purposely charged hidden markups on certain transactions to customers, making the bank $20M in extra revenue.

Addressing the charges, McLellan’s lawyer claims that his client did not commit any securities law violations and that all banks charge client markups on bond transactions to make money. The attorney also noted that it was State Street and not the bank that profited from the charges.

The U.S. Department of Justice has charged McLellan with securities fraud, conspiracy, and wire fraud.

Ex-Wells Fargo Broker to Be Barred
Christopher John Pierce, a former Wells Fargo & Co. (WFC) broker, will be barred from working with any FINRA-registered firm and associating with any member of the self-regulatory organization. Pierce agreed to the bar after he was accused of stealing money from the accounts of banking customers.

Continue reading "Securities Cases: Stephens Inc. to Pay $900K Fine, FINRA Bans Ex-Wells Fargo Broker, And Former State Street Executive is Accused of Charging Hidden Fees" »

May 13, 2016

SEC Files Fraud Charges in Native American Tribal Bonds Scam

The U.S. Securities and Exchange Commission is charging John Galanis, his son Jason Galanis, and five other people with fraud involving a multimillion-dollar tribal bonds scam. The SEC claims that Jason ran the scheme to obtain a “source of discretionary liquidity.”

He and his father allegedly persuaded a Native American tribal corporation affiliated with the Wakpamni District of the Oglala Sioux Nation to put out limited recourse bonds that the two of them had structured. Jason then acquired two investment advisory firms and appointed officers to coordinate the purchase of $32 million in bonds. He used client money to purchase the bonds.

Investors were told that the bond proceeds would be invested in annuities to make enough money to pay back bondholders and to benefit the tribal corporation. Instead, the money went to a bank account owned by a company that Jason and his associates controlled. The funds were allegedly misappropriated to make luxury purchases and to pay lawyers representing Jason and his dad in a criminal case involving unrelated stock fraud charges.

The SEC wants disgorgement, interest, penalties, and permanent injunctions. Also named in the complaint are Devon Archer, Bevan Cooney, Hugh Dukerley, Gary Hirst, and Michelle Morton. They face charges of violating federal securities laws’ antifraud provisions and other rules.

Continue reading "SEC Files Fraud Charges in Native American Tribal Bonds Scam" »

April 27, 2016

Broker News: J.P. Morgan Firms to Pay $1M Fine, FINRA Bans Broker For Money Laundering, and Former Maine Broker Gets 3-Years in Prison for Fraud

Two J.P. Morgan Firms Fined over Deficiencies
J.P. Morgan Securities and J.P. Morgan Clearing Corp. have been fined $775K and $250K respectively for several deficiencies. J.P. Morgan Securities is a broker-dealer of the bank JPMorgan Chase (JPM). .J.P. Morgan Clearing is the custodian, clearing, lending, and settlement arm of the bank. The fines were imposed by FINRA.

According to the self-regulatory organization, the firms committed a number of breaches that violated FINRA and SEC rules. The alleged violations by the brokerage firm mostly affect clients of J.P. Morgan Private Bank and JPMS Heritage Private Client Services, which are two JPMS Global Wealth Management businesses.

From 9/07 to 2014, JPMS purportedly did not send letters to clients confirming modifications to their investment goals within 30 days of the changes. JPMS also allegedly did not collect and check the outside brokerage account statements of nearly 2,000 representatives from ’12 – ’13. Morgan Clearing Corp. is accused of, from ’11-’13, not sending out yearly privacy notices to hundreds of thousands of account holders at the broker-dealers where it provides clearing and custody.


Broker Banned by FINRA for Money Laundering
The Financial Industry Regulatory Authority said that it is barring James Van Doren. The broker was sentenced to 15 months behind bars for a money laundering scam.

According to FINRA, Van Doren took part in unethical behavior by helping to make it possible for a childhood friend and business associate to avoid certain legal duties. The former broker invested in a number of real estate deals with the friend’s company and helped conceal assets when the company couldn’t fulfill its duties.

He also accepted $244K from the friend to hide the assets that his creditors were looking for. He eventually returned most of the funds to the friend while keeping some for financial losses he sustained.

Continue reading "Broker News: J.P. Morgan Firms to Pay $1M Fine, FINRA Bans Broker For Money Laundering, and Former Maine Broker Gets 3-Years in Prison for Fraud " »

April 6, 2016

Securities Fraud: Ex-SWS Financial Services Broker Faces Improper Trading Charges, Ex-Fox Commentator Settles Penny Stock Scam Case, and Former Investment Adviser Gets 7-Years in Prison

FINRA Accuses Ex-Broker of Unsuitable Trading Involving Mutual Funds
David Randall Lockey, a former broker, is facing Financial Industry Regulatory Authority charges for allegedly engaging in improper trading of customer accounts while associated with SWS Financial Services Inc. He is no longer with that firm, now called the Hilltop Securities Independent Network. According to the regulator, Lockey took part in “unsuitable short-term trading and switching” involving unit investment trusts and mutual funds in four accounts between ’12 and ’14.

Lockey purportedly made about $75,730 for himself and the firm while engaging in improper trading. Meantime, three of the four customers whose accounts he used sustained losses of $15,699. The fourth customer made a gain of almost $5,000.

FINRA said Lockey has not been registered with any broker-dealer since 2014.


Ex-TV Commentator Settles Penny Stock Fraud Charges with the SEC
The U.S. Securities and Exchange Commission is charging former FOX commentator Tobin Smith with fraud. According to the regulator, Smith, who is also a market analyst, and his NBT Group fraudulently promoted a penny stock to investors.

The SEC said that both Smith and his firm received payments to prepare and distribute e-mails, articles, blogs, and other communication promoting IceWEB Inc. stock. They purportedly failed to fully disclose they were receiving the compensation.

The investors were not made aware of that part of what Smith and NBT were paid was linked to a sustained rise in the data storage company’s share price. The Commission said that marketing materials the investors received included misleading and false statements put there to artificially up the share price and trading volume of IceWEB stock. For example, payment for promotional efforts was $300K and IceWEB stock. NBT could also make over $250K if marketing campaigns proved successful.

Continue reading "Securities Fraud: Ex-SWS Financial Services Broker Faces Improper Trading Charges, Ex-Fox Commentator Settles Penny Stock Scam Case, and Former Investment Adviser Gets 7-Years in Prison" »

March 29, 2016

Unregistered Investment Adviser Accused of $53M Ponzi Scam Involving Pre-IPO Companies

New Jersey adviser John Bivona is facing U.S. Securities and Exchange Commission charges accusing him of raising over $53M from investors in a Ponzi-like scam that involved the selling of investments in pre-IPO tech companies. However, contends the SEC, instead of investing the funds as intended, he used investor money to pay taxes, legal fees, a car loan, a vacation house mortgages, and cover his nephew’s credit card bills.

The regulator, in its complaint, said Bivona funneled millions of dollars into earlier funds that he and his company managed, while at least $5.7M went to family members, including nephew Frank Mazzola, who also is dealing with SEC charges for a previous investment scam.

The Commission alleges that Bivona raised the money through Saddle River Advisors, which has not registered with the regulator since 2013, and SRA Management. Because he purportedly took the money for his own spending, to pay family bills, and keep different funds running, his firms often never had enough money to buy the shares investors had been promised.

The SEC believes that Bivona was able to keep his Ponzi scam going because he kept transferring funds between over a dozen bank accounts associated with a number of entities. Meantime, investors never received financial statements they were promised.

In its press release announcing the charges, the SEC linked to one of its bulletins that identifies the possible warnings signs that the unregistered offering you are thinking of investing in may be a scam. The Commission noted that unregistered securities are

Continue reading "Unregistered Investment Adviser Accused of $53M Ponzi Scam Involving Pre-IPO Companies" »

March 15, 2016

Stockbroker Fraud: Ex-JPMorgan Broker Who Gambled Gets Five Years, FINRA Bars Broker Over Elder Financial Fraud, Risky Alternative Investment Sales and Ex-Broker is Indicted by Jury for Allegedly Bilking Clients of $2.8M

Former JPMorgan Broker Who Stole Over $20M from Richest Clients, Gambled, Goes to Prison
Michael Oppenheim, a former broker with JPMorgan Chase & CO. (JPM), has been sentenced to five years behind bars. Oppenheim pleaded guilty last year to stealing over $20 million from 10 of his richest clients. At one point Oppenheim managed nearly $90 million for 500 clients. He claims he was addicted to sports gambling.

He began betting on NFL games in 1993 and later got involved in online sports betting. After losing hundreds of thousands of dollars, he began stealing from clients to cover his losses. Oppenheim also started options trading in tech stocks to repay these clients and in one day lost $2.7M. He concealed the theft by providing customers with bogus account statements.

Prosecutors contend that Oppenheim persuaded clients to take out up to millions of dollars from their accounts by promising to put their money in low risk municipal bonds that would be kept at the bank. Instead, he used the funds to get cashier’s checks that he deposited into accounts that were his but located outside the bank. Oppenheim purportedly targeted clients he knew wouldn’t be watching their accounts closely. His scam went on for over seven years.


FINRA Bars Broker for Senior Financial Fraud
The Financial Industry Regulatory Authority has barred David Joseph Escarcega from the financial industry. Escarcega is accused of making a dozen unsuitable recommendations involving debentures tied to the life insurance policy secondary market and targeting elderly clients. He must also pay a $52,270 fine, which is how much he kept in commissions.

According to FINRA, Escarcega sold the debt instruments, which were issued by CWG Holdings Inc., from 3/12 to 6/13. The regulator said that the debentures were very risky and only suitable for investors that could afford to lose all of their investments. The 12 customers involved in this matter were not that type of investor. A lot of the investments were placed in IRAs.

Continue reading "Stockbroker Fraud: Ex-JPMorgan Broker Who Gambled Gets Five Years, FINRA Bars Broker Over Elder Financial Fraud, Risky Alternative Investment Sales and Ex-Broker is Indicted by Jury for Allegedly Bilking Clients of $2.8M " »

March 14, 2016

SEC Cases: Ex-AIG Broker-Dealers to Pay $9.5M For Purportedly Directing Investors Toward Pricier Mutual Funds, California Water District Resolves Bond Offering Charges for $125M, & Businessman is Accused of Stealing Investor Money

Former AIG Affiliate Brokerage Firms to Pay $7.5M Fine, $2M Restitution Over High-Priced Mutual Funds
Royal Alliance Associates, FSC Securities Corp., and SagePoint Financial have agreed to pay over $9.5M to resolve Securities and Exchange Commission charges accusing them of guiding clients toward expensive mutual fund share classes so that the firms could garner additional fees. The brokerage firms were formerly under the AIG Advisor Group umbrella.

According to the regulator, the firms put clients in share classes that charged 12b-1 fees for distribution and marketing even though they were eligible to purchase shares that didn’t come with these added fees.

Because of the placement in the costlier fund classes, the firms collected an additional $2M in fees and did not disclose their conflict of interest in choosing the share classes that would make them more money.

The AIG affiliates are accused of not monitoring advisory accounts quarterly to make sure that churning didn’t take place. The SEC order is claiming breach of fiduciary duty and numerous compliance failures.

California Businessman Allegedly Stole Investor Money, Covered Up Fraud
Daniel R. Nase is accused of stealing investor assets and then trying to conceal the theft once the SEC discovered his scam. The regulator claims that the California businessman raised funds from investors via an unregistered offing of common stock in his Bic Real Estate Development Corp. He then used the funds to cover his own bills.

The Commission said that Nase, who was not registered with any state regulator or the SEC to sell investments, told investors that his company would invest in promissory notes and real estate. Instead, he improperly placed those under his name, his wife’s name, of the name of their family trust. He allegedly tried to hide his fraud by investing the assets that he stole back into BIC to make it look like he was raising his equity stake in the company.

California Water District Accused of Misleading Investors in $77M Bond Offering
The SEC is charging Westlands Water District with misleading investors about its financial state while issuing a $77M bond offering. The agricultural water district is the largest one in the state of California.

According to the SEC, Westland, in prior bond offerings, consented to keep a 1.25 debt service coverage ratio but discovered in 2010 that a lower water supply and drought conditions would keep it from making enough money to keep up that ratio, which measures an issuer’s ability to make future bond payments. To meet the ratio without upping customer rates, Westlands reclassified the funds.

Continue reading " SEC Cases: Ex-AIG Broker-Dealers to Pay $9.5M For Purportedly Directing Investors Toward Pricier Mutual Funds, California Water District Resolves Bond Offering Charges for $125M, & Businessman is Accused of Stealing Investor Money " »

March 9, 2016

Banc de Binary to Settle Fraud Charges With SEC, CFTC for $11M

Banc de Binary Ltd. has settled a fraud lawsuit by the Commodity Futures Trading Commission and the SEC accusing the Cypriot financial trading company of illegally signing American investors to join its binary options trading program. According to the regulators, from 2011 and 2013, Banc de Binary pursued and took orders from U.S. customers on contracts connected to currency, commodity, and stock prices. By doing this, the company purportedly got around a ban in the US that prohibited off-exchange binary option contracts and received net deposits of $11M from over 6,000 U.S. customers

As part of the settlement, the financial trading company has agreed to pay $7.1M in disgorgement and restitution and $2M in penalties to the CFTC. It will pay the SEC $1.95M in civil penalties. $9.05M of the settlement will go toward paying back the U.S. customers who suffered harm in this matter. Oren Laurent, who is the founder of Banc de Binary, will pay $150K in the settlement.

Banc de Binary is considered the biggest binary options operator. Binary options offer all or nothing payouts according to price moves. They remain unregulated in a lot of the world.

Continue reading "Banc de Binary to Settle Fraud Charges With SEC, CFTC for $11M" »

March 4, 2016

SEC Bars Former Investment Adviser Over Alleged Misuse of Exchange-Traded Funds

The U.S. Securities and Exchange Commission is barring Nicholas Rowe, the former owner of registered investment advisor Focus Capital Wealth Management, from the industry. The charges come in the wake of parallel proceedings in New Hampshire where state regulators barred him from being licensed as an investment adviser. The New Hampshire Bureau of Securities Regulation also said he had to pay $20K.

Rowe and his RIA are accused of using inverse and leveraged exchange-traded funds in a way that was not suitable for clients. They also purportedly made misrepresentations regarding the fees that the clients would be charged.

Focus Capital had been registered with the SEC until 2012 when it registered with New Hampshire instead. The state launched a probe into the RIA’s investment practices, which allegedly included placing the assets of older investors into unsuitable strategies without notifying them that was what was happening. A number of elderly clients, including three widows, allegedly lost close to $1.M.

Continue reading "SEC Bars Former Investment Adviser Over Alleged Misuse of Exchange-Traded Funds " »

February 13, 2016

Securities Fraud: Ex-Broker Jerry McCutchen Under Investigation for REIT Sales, Hedge Fund Manager Must Pay $18M to SEC, and NASAA Steps Up Fight Against Elder Financial Fraud

Former Broker Is Subject of Numerous Securities Claims
If you are an investor who sustained losses after purchased real estate investments trusts with the help of former broker Jerry McCutchen, you may have grounds for a securities claim. According to the Financial Industry Regulatory Authority’s BrokerCheck Report, McCutchen is accused of making unsuitable investment recommendations and he has been the subject of over a dozen broker fraud claims alleging negligence, misrepresentations, and other claims.

In one case, McCutchen, while registered with Berthel Fisher & Company Financial Services, Inc., is accused of placing a couple’s retirement funds in speculative, illiquid, alternative investments that he misrepresented as safe investments in line with the husband and wife’s investment goal to keep their money safe. In reality the Tier REIT, the Icon Leasing Fund Twelve LLC, and others, did not have proper diversity or allocation and were not suitable for the couple.

McCutchen is not registered with any firm at this time nor is he a licensed broker at the moment. He was registered with Berthel Fisher & Co., Bay City Securities, Next Financial Group, First Funds Inc., FSC Securities Corp, Central Brokerage Services, Commonwealth Equity Services, MML Investors, Proequities Inc., and Walnut Street Securities.


NY Hedge Fund Manager Ordered to Pay $18M
Moazzam “Mark” Malik, and his American Bridge Investment Group LLC are facing SEC charges accusing them of bilking 19 clients of over $1M through the sale of limited partnership interests in a fake hedge fund that was run under different names. The SEC said that Malik claimed that the fund held $100M when that amount was never more than about $90,000. Now, the regulator is ordering Malik to pay $18M.

Continue reading "Securities Fraud: Ex-Broker Jerry McCutchen Under Investigation for REIT Sales, Hedge Fund Manager Must Pay $18M to SEC, and NASAA Steps Up Fight Against Elder Financial Fraud" »

January 19, 2016

Securities News: Alternative Fund Manager Accused of Misleading Investors, Futures Trader Goes to Jail for Fraud, Ex-NBA Player Gets Sentence for Ponzi Scam, and 9th Circuit Upholds Investment Manager’s Conviction

Equinox Fund Management Resolves SEC Charges For Over $5.8M
A Denver-based alternative fund manager has consented to settle Securities and Exchange Commission charges accusing it of misleading investors about the way certain assets were valued and for overcharging management fees. According to the regulator, Equinox Fund Management LLC determined its management fees differently from the method it described in registration statements for The Frontier Fund, which is a managed futures fund.

Although registration statements said that management fees would be calculated based on each series’ net asset value, Equinox used the assets' national trading value instead. Also, the firm is accused of straying from the valuation methodology it had disclosed for certain holdings.

The fund manager will pay back investors about $5.4M in excessive management fees that it was paid over seven years, in addition to $600K in prejudgment interest. It also will pay a $400K penalty.


Futures Trader Goes to Jail, Pays Restitution for Securities Fraud
RXM Holdings Ltd. futures trading director Robert Scott Wiens is sentenced to one year in prison after pleading guilty to securities fraudhttp://www.stockbroker-fraud.com/legal-news.html. He also will pay $260k in restitution to investors he harmed.

Wiens was an unlicensed securities professional in 2010 and 2011. He sold fraudulent investments, which he traded on the futures market.

Wiens directed investors to open bank accounts under RXM’s name for their funds. He told them that there was zero risk and returns were guaranteed. He then used the money in the accounts to pay off earlier investments and cover his own spending.

Continue reading " Securities News: Alternative Fund Manager Accused of Misleading Investors, Futures Trader Goes to Jail for Fraud, Ex-NBA Player Gets Sentence for Ponzi Scam, and 9th Circuit Upholds Investment Manager’s Conviction " »

January 15, 2016

Securities Headlines: Ohio Financial Adviser Faces Criminal Charges, Petters Ponzi Scam Investors Still Waiting for Their Money, and FINRA Recommends Disciplinary Action Against Ex-Jefferies Bond Trader

Ohio Financial Adviser is Indicted in $15M Securities Fraud
Evolution Partners Wealth Management owner Larry Werbel has been indicted on criminal charges accusing him of involvement in a securities scam to bilk at least 100 investor of over $15M. Werbel recruited investors for shares of VgTel Inc. He and other brokers purportedly promised high dividends even though the shares were sold and purchased by companies belonging to the alleged scammers so that they could artificially inflate the share price.

According to prosecutors, over $9M of investor funds were pockets by the fraudsters. Werbel, who prosecutors say got investors to purchase $3M in VgTel shares, received over $300K in kickbacks.


He is charged with securities fraud, conspiracy to commit securities fraud and wire fraud, investment adviser fraud, wire fraud, and making false statements to federal officers. Werbel claims he is innocent.

Meantime, the man accused of masterminding the securities scam, Edward Durante, was arrested in Germany and brought back to the US last month. He previously was convicted of securities fraud in 2011. The U.S. Securities and Exchange Commission has filed a civil case against Evolution Partners, Durante, and others.


Continue reading "Securities Headlines: Ohio Financial Adviser Faces Criminal Charges, Petters Ponzi Scam Investors Still Waiting for Their Money, and FINRA Recommends Disciplinary Action Against Ex-Jefferies Bond Trader" »

January 8, 2016

SEC Cautions Mutual Funds That They May be Misdirecting “Sub-Accounting Fees” And Impacting Investor Returns

The Securities and Exchange Commission’s Division of Investment Management has put out a guidance on its website cautioning mutual fund directors to more closely scrutinize the money that is paid to brokers and certain other intermediaries. The warning comes following a sweep exam, which found that fees that should be going toward record-keeping and other administrative services are instead being directed toward encouraging fund sales. A number of mutual funds, brokerage firms, investment advisers, and transfer agents were examined prior to the issuance of this guidance.

SEC rules stipulate that sub-accounting fees cannot go toward finance distribution. These fees should only go toward record-keeping and shareholder services. However, there is an issue with mutual fund-maintained omnibus accounts in which all the fees can be placed together. In such instances, payments made to brokers for selling certain funds may get buried in these administrative fees.

Now, the Commission wants fund directors to watch out for fees that intermediaries selling the funds are getting for account services. It wants these directors to establish processes to assess whether a sub-accounting fee is being harnessed to increase sales. It also is calling on fund service providers and advisers to explain distribution and servicing specifics to fund directors.

Continue reading "SEC Cautions Mutual Funds That They May be Misdirecting “Sub-Accounting Fees” And Impacting Investor Returns " »