July 2, 2015

SEC Appeals Its In-House Agency Judge’s Decision to Throw Out Charges Against Financial Advisers Paid by Fidelity to Push Specific Mutual Funds

Securities and Exchange Commission employees are appealing a ruling by an administrative law judge dismissing charges against two financial advisers accused of not notifying clients that Fidelity Investments (FNF) had paid them to sell specific mutual funds. In the Texas securities case, SEC Administrative Law Judge James E. Grimes rejected claims that The Robare Group and two of its owners violated the law by failing to adequately disclose that they had a financial relationship with the brokerage firm. Grimes said that from listening to Mark L. Robare and his son-in-law Jack L. Jones Jr. testify, he was hard pressed to imagine them attempting to bilk anyone. This is one of the few cases presided over by one of its judges that the SEC has lost.

Fidelity is The Robare Group's custodian. For the last 11 years, the registered investment advisor has been part of a program in which Fidelity pays it a portion of the revenue earned from the sale of certain third-party mutual funds. The payment goes to the adviser who made the mutual fund sale happen.

Advisors are given access to the funds without any transaction fees. As the custodian, Fidelity refers to payments made to advisers not as commission but as compensation for shareholder administrative fees.

In their appeal, the SEC staffers said that they feared Grimes’ ruling in this case establishes a troubling precedent that shifts the burden of full disclosure of a conflict interest from an investment adviser to a compliance consultant. They said this could allow an investment adviser to be excused from certain securities violations as long as he has a compliance consultant that has not “affirmatively” objected to a “particular disclosure.”

Continue reading "SEC Appeals Its In-House Agency Judge’s Decision to Throw Out Charges Against Financial Advisers Paid by Fidelity to Push Specific Mutual Funds" »

June 27, 2015

Federal Judge in Texas Says Law Firms Must Face Lawsuit Seeking Creditor Payments in Stanford Ponzi Fraud

Four years after Allen Stanford’s $7 billion Ponzi scam was uncovered in 2009, investors who lost money in the scheme are still trying to recover their funds. The 65-year-old Stanford is serving 110-years behind bars for selling investors bogus high-yield CD’s through his Stanford International Bank based in Antigua. Prosecutors said he used customers’ money to fund his expensive lifestyle.

This week, U.S. District Judge David Godbey in Dallas said that law firms Proskauer Rose and Chadborne & Parke will have to contend with claims brought by a committee of these investors and Ralph S. Janvey, the court-appointed receiver for Allen Stanford’s companies.

Chadborne and Prosakuer had sought to have this lawsuit, which seeks to hold the two law firms liable for legal malpractice, dismissed. The plaintiffs contend that Thomas Sjoblom, who worked at the two firms, allegedly obstructed regulator probes into the Ponzi Scam and helped Stanford conceal the SEC’s investigation from auditors.

Now, the Texas-based judge has decided that Janvey and the investor committee can pursue claims of negligent supervision, professional negligence, civil conspiracy, and aiding and abetting fraud against the two firms. Judge Godbey stated that the allegations suggest that Sjobolm knew that Stanford was potentially running a Ponzi scam, and this awareness was imputed to both firms. Godbey said that the plaintiffs have alleged that the defendants knew that Stanford was engaged in sufficient wrongdoing.

Continue reading "Federal Judge in Texas Says Law Firms Must Face Lawsuit Seeking Creditor Payments in Stanford Ponzi Fraud" »

June 18, 2015

San Antonio Spurs’ Tim Duncan Addresses $20M-Plus Texas Securities Case Against His Former Financial Adviser

Earlier this year, our securities law firm published a blog post reporting that San Antonio Spurs’ Tim Duncan had filed a Texas securities case against financial representative Charles Banks. Duncan contends that due to unsuitable recommendations made to him by Banks, he allegedly lost some $25 million.

Banks, a private-equity investor, was Duncan’s adviser for nearly two decades, since the beginning of his professional sports career. The NBA All-Star says that Banks persuaded him to get involved in investments that were bad for Duncan but good for the financial adviser. He also claims that Banks forged his signature and withheld his return on a loan. The San Antonio Spurs star says that over the years, he’s invested millions of dollars in products and businesses that Banks either owned or had a financial stake in.

Meantime, Banks claims that Duncan’s losses are because of the player’s own impatience or due to misunderstandings. He argued that Duncan is using the Texas securities case to exit certain limited partnership investments.

Continue reading "San Antonio Spurs’ Tim Duncan Addresses $20M-Plus Texas Securities Case Against His Former Financial Adviser" »

June 9, 2015

Trustee Says that Texas Company Life Partners Holdings Bilked Investors

According to bankruptcy trustee H. Thomas Moran II, Life Partners Holdings (LPHIQ) ran a scam to bilk its investors. The Texas company, which sold over $1.3 billion of fractional interests in individual life insurance policies to over 20,000 individuals, is accused of unnecessarily demanding that a lot of investors pay yearly premiums on policies that had enough funds to pay for future premiums. Many of these investors were forced to resell or abandon these investments while company insiders made money.

Now, Moran wants a court to give him permission to pool all of the policies and use accessible cash to pay premiums where necessary. This would relieve investors of having to continue to put more of their funds into the scam to keep their investments.

Life Partners used to be a huge player in the secondary market for life insurance. The company makes arrangements to purchase life insurance policies from people. Life Partners would then divide up the policies into fractional interests. Retail investors would buy the rights to collect on them.

Continue reading "Trustee Says that Texas Company Life Partners Holdings Bilked Investors" »

May 11, 2015

Texas-Based Retirement Planning Firm Accused of Making False Claims to Investors About Life Settlements

The Securities and Exchange Commission is charging Novus Financial and principals Brady J. Speers and Christopher A. Novinger with making false claims about life settlements. The regulator filed its claim in the U.S. District Court for the Northern District of Texas.

According to the SEC’s complaint, from ’12 – ’14, the retirement planning firm and its principals sold about $4.3 million in life settlement interests to 26 investors. Speers and Novinger are accused of describing the investments as secure and safe. Both were purportedly willing to manipulate the financial data of investors to make the sale happen.

The Commission also claims that the firm, Novinger, and Speers used a net worth calculator that was bogus. This allowed a number of prospective investors to improperly qualify to buy the interests. In one instance, the non-homestead assets of one couple were falsely inflated to $1.5 million from $263K because of the calculator.

The investors were also supposedly told that the interests were safe like CDs, guaranteed, and federally insured. However, as David Peavler, SEC Associate Director of the agency’s Forth Worth Regional Office, pointed out, life settlements are never free of risk, guaranteed, or federally insured.

The SEC also is charging Speers Financial Group LLC and ICAN Investment Group for acting as unregistered brokerage firms. The Commission wants injunctive relief, financial penalties, and the return of ill-gotten gains plus interest.

Our Texas securities fraud law firm is here to help investors recoup their losses. If you sustained losses from life settlement fraud that you suspect may be a result of broker negligence or wrongdoing, please contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Read the complaint (PDF)


More Blog Posts:
Killeen Man Accused of Texas Securities Fraud Targeting Military, Stockbroker Fraud Blog, April 23, 2015

Texas Securities Scam Allegedly Bilked Investors of $4.4M, Stockbroker Fraud Blog, April 18, 2015

Another Institutional Investor Fraud Lawsuit Accuses American Realty Capital Properties Of Violating Securities Laws, Institutional Investor Securities Blog, January 26, 2015

April 23, 2015

Killeen Man Accused of Texas Securities Fraud Targeting Military

The U.S. Securities and Exchange Commission is accusing Leroy Brown Jr. of Texas securities fraud. Brown, a U.S. army veteran, allegedly solicited ex- and current members of the military and others to invest with him and his firm LB Stocks and Trades Advice.

Among his purported wrongdoings are presenting his firm as SEC- and Financial Industry Regulatory Authority-registered, when it is neither, touting himself as holding all securities licenses, which he does not, and creating a bogus sense of success and legitimacy via numerous misrepresentations to get people to invest. Brown also allegedly persuaded investors to buy $1,000 membership certificates in the firm’s stocks to get involved in purported investments in undeveloped real estate that were purportedly “guaranteed” to double or even triple their money. Instead, said the SEC, he took investors’ funds and placed the cash in his own accounts. The Commission believes the Texas securities scam has gone on for about sixteen months.

Affinity Scams
This type of fraud targets members of an identifiable group. Often, the fraudster will be a group member or have some other affiliation. Affinity scams take advantage of the friendship and trust in the group, with members persuaded in part to invest because of the “trusted” connection.

Our Houston securities fraud law firm represents individuals and institutions that have been the victim of a Texas financial scam.

Ways to Avoid Affinity Fraud:

• Do your due diligence even if you know or trust the person with the investment opportunity
• Watch out for investments promising guaranteed or amazing returns
• Make sure that you agree to any investment opportunity in writing

Contact Shepherd Smith Edwards and Kantas, LLP today.

The SEC Complaint (PDF)

Investor Bulletin: Savings and Investing Basics for Military Personnel, SEC.gov


More Blog Posts:
Texas Securities Scam Allegedly Bilked Investors of $4.4M, Stockbroker Fraud Blog, April 18, 2015

Securities Class Action Says ARCP Made Over $900M From Acquisition Binge, Institutional Investor Securities Blog, April 20, 2015

Another Institutional Investor Fraud Lawsuit Accuses American Realty Capital Properties Of Violating Securities Laws
, Institutional Investor Securities Blog, January 26, 2015

April 18, 2015

Texas Securities Scam Allegedly Bilked Investors of $4.4M

The Securities and Exchange Commission has filed a lawsuit accusing Mieka Energy Corporation of Texas Securities Fraud. The oil and gas company and Daro Ray Blankenship, its president and founder, allegedly defrauded at least 60 investors located in different states of about $4.4 million. The regulator is also charging Vadda Energy Corporation, the publicly traded parent company of Mieka, of fraud and reporting violations, including deceptively promoting Mieka’s investments as a successful venture.

The scam is said to have taken place between 2010 and 2011, when investors were purportedly fooled into investing funds that were supposed to purchase energy-related investments while making big returns on other investments. The SEC said that Blankenship and Mieka engaged in boiler room cold calling to market these investments related to drilling, production, and oil and gas exploration.

To get around federal securities regulations, Mieka and Blankenship called their securities offering a “joint venture” and said that the investment interests were not securities, when really, under federal securities law, they were. The regulator said that Blankenship took all of the offering proceeds and spent the money on unrelated projects and expenses. He then used deceptive updates and misleading public filings to mislead investors.

Mieka salesmen Stephen Romo and Robert Myers are accused of taking part in the scam by selling and marketing the joint venture offerings to the public and receiving about $190,000 in commissions. The SEC has charged them with acting as unregistered brokers.

The Commission wants permanent injunctions against everyone, as well as penalties, disgoregement, and prejudgment interest. It is seeking to permanently bar Blankenship from serving as a director and officer of a public company.

Our Texas securities fraud lawyers are here to help investors get their money back.

SEC Charges Texas Oil Company and Its Founder with Securities Fraud, SEC, April 10, 2015


More Blog Posts:
Two Firms Charged in Texas With Running Fraudulent Commodity Pool Must Pay Over $7.5M, Texas Securities Fraud, April 6, 2015

Texas-Based Broker-Dealer Faces SEC Charges Over Supervisory and Customer Protection Violations, Stockbroker Fraud Blog, March 6, 2015

Plaintiffs Appeal Federal Court’s Ruling Dismissing Their 401(K) Lawsuit Against Fidelity, Institutional Investor Securities Blog, April 13, 2015

April 6, 2015

Two Firms Charged in Texas With Running Fraudulent Commodity Pool Must Pay Over $7.5M

A district court in Texas is ordering a permanent injunction against RFF GP, LLC, KGW Capital Management, LLC, and Kevin White. The order is related to a 2013 Commodity Futures Trading Commission complaint charging them with fraud and misappropriation related to the running of a commodity pool.

The regulator says that defendants bilked participants when they got them to invest in the hedge fund and the commodity pool, named Revelation Forex Fund, LP. The fund was supposed to trade in off-exchange foreign currency. According to the CFTC, however, the defendants fraudulently solicited about $7.4 million from over 20 participants, misappropriating some $1.7 million from their money to cover personal spending and other matters. They allegedly fabricated the fund’s performance and lied about White’s experience in investing.

The Securities and Exchange Commission also filed its Texas securities case against White and the firms, along with a few other entities. The SEC said that White promoted a sophisticated forex trading strategy that was low risk but would lead to huge earnings. He also touted the Revelation Forex as a $1 billion hedge fund that managed to bring in returns of over 393% returns while earning an over 36% compound yearly return rate. White marketed himself as having 25 years of experience working in Wall Street when he had worked just six years as a licensed securities professional in Texas before the NYSE barred him.

Earlier this year, White was sentenced to eight years for mail fraud after pleading guilty to the charge in connection with his commodity trading fraud scam. He started his sentence this week.

Our Texas securities fraud lawyers are here to help investors recoup their losses. Unfortunately, there are those in the securities industry who continue to get away with wrongdoing and it is investors who suffer. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Read the Consent Order (PDF)

Federal Court Orders Texas-based RFF GP, LLC, KGW Capital Management, LLC, and Kevin G. White to Pay over $7.5 Million for Operating a Fraudulent Commodity Pool, CFTC, April 6, 2015


More Blog Posts:
Texas-Based Broker-Dealer Faces SEC Charges Over Supervisory and Customer Protection Violations, Stockbroker Fraud Blog, March 6, 2015

Barclays Must Pay Former Trader $9M, Ex-Raymond James Broker Gets Back $650K Award, Institutional Investor Securities Blog, April 6, 2015

SIFMA Says White House Isn’t Entirely Right About The Cost of Abusive Trading to Investors, Stockbroker Fraud Blog, March 30, 2015

March 6, 2015

Texas-Based Broker-Dealer Faces SEC Charges Over Supervisory and Customer Protection Violations

The Securities and Exchange Commission is charging H.D. Vest Investment Securities with violating customer protection rules. The regulator contends that the Texas-based broker-dealer did not adequately supervise registered representatives that are accused of misappropriating customer monies.

H.D. Vest will pay a penalty to settle the charges. It has consented to get an independent compliance consultant that will help the firm enhance its supervisory controls.

The SEC’s order, which institutes a settled administrative proceeding, said that the firm did not have proper procedures and policies to oversee the external business activities of representatives. This allowed some of them to use outside businesses to bilk the brokerage firm’s customers. Some even deposited or moved customer brokerage funds into these external business accounts.

The Commission contends that the Texas-based brokerage firm did not abide by customer protection rules. The rules required H.D. Vest to conduct certain calculations and, if needed, place monies in a reserve account in case customers are hurt by misconduct. The firm did not make these calculations nor did it keep a reserve account. The SEC also said that the broker-dealer did not have the adequate supervisory controls that would have allowed it to track the movement of customer funds to the outside businesses run by registered representatives.

Last month, an ex-H.D. Vest broker was arrested and charged with wire fraud. Lewis Joseph Hunter allegedly contacted five elderly persons—they were his clients while he was at the firm— after he had already left the broker-dealer. He allegedly persuaded them to put their money in what ended up proving to be worthless stocks. They gave him some $661,500 to invest. He is accused of persuading one investor to let him transfer $150,000 from his account at HD Vest to an account that he controlled.

Hunter purportedly gave them investment advise, notified the individuals that he was using their money to buy securities, and gave them stock certificates to back up his statements. According to a federal prosecutor, Hunter was, in fact, using the money for personal enrichment, to cover his personal expenses, and pay back other investors who had become suspicious and demanded their funds back.

The SEC has already ordered Hunter to cease and desist from activities related to investments. The agency told him to pay a $150,000 civil penalty and $296,000 in restitution.

Our Houston securities fraud lawyers are here to help investors get their money back. We have helped thousands of individual and institutional investors recoup their funds, representing clients in arbitration and the courts. Contact our Texas securities law firm today. Your initial consultation with Shepherd Smith Edwards and Kantas, LTD LLP is a free, no obligation case assessment.

Read the SEC Order (PDF)


More Blog Posts:
Texas Wyly Brothers Must Pay SEC $299.4M for Securities Fraud, Stockbroker Fraud Blog, February 28, 2015

Jury Says Ex-Envoy Involved in Stanford Ponzi Scam Must Pay $750K, Stockbroker Fraud Blog, February 16, 2015

DOJ Gets Ready to Wrap Mortgage Bond Case Against Standard & Poor’s, Probes Moody’s, Institutional Investor Securities Blog, January 31, 2015

February 28, 2015

Texas Wyly Brothers Must Pay SEC $299.4M for Securities Fraud

Sam Wyly and his late brother Charles Wyly’s estate must pay $299.4 million for committing securities fraud. The final judgment comes months after a jury found them civilly liable.

The SEC sued the Texas billionaire brothers in 2010. The regulator accused them of making $553 million in undisclosed profits when they traded in four companies that used trusts in the Isle of Man. The companies included Scottish Annuity & Life Holdings Ltd., Sterling Commerce Inc., Michaels Stores Inc., and Sterling Software Inc.

The SEC contends that the Wylys established the complex trust system so they could make untaxed profits from concealed trades in companies that they controlled. The scam purportedly occurred over a period lasting a decade.

Charles Wyly died in 2011. The SEC is now going after his estate.

In the final judgment, U.S. District Judge Shira Scheindlin ordered Sam to pay $198.1 million in disgorged gains, in addition to interest. Charles’ estate must pay $101.2 million. The ruling could lead to an appeal in the wake of Sam Wyly’s bankruptcy case. He filed for Chapter 11 protection last year.

In a related ruling, Scheindlin found that the Wylys were entitled to receive an offset for amounts due to the IRS based on sums paid to the Commission.

Our Texas securities fraud lawyers represent investors with claims against brokers, investment advisers, and financial firms. Contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your initial case consultation with our stockbroker fraud law firm is free.

Texas Wyly brothers must pay $299 million in SEC fraud case: judge
, Reuters, February 26, 2015

Wyly Brothers Ordered to Give up $299 Million in Fraud Suit
, AP/ABC News, February 27, 2015


More Blog Posts:

Jury Says Wyly Brothers From Texas Committed Fraud, Stockbroker Fraud Blog, May 14, 2014

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

John Carris Investments Expelled by FINRA, Institutional Investor Securities Blog, January 27, 2015

February 16, 2015

Jury Says Ex-Envoy Involved in Stanford Ponzi Scam Must Pay $750K

A federal jury has decided that ex-U.S. Ambassador to Ecuador Peter Romero would not be allowed to keep over $758K in expenses, fees, and interest he earned while lending his legal counsel and credibility to Allen Stanford. Instead, he will pay that sum to the court appointed receiver.

Stanford was convicted in 2012 of fraud and money laundering, perpetuating a global multibillion-dollar scam in the process. His Houston-based empire was shut down in 2009 when the U.S. Securities and Exchange Commission accused him of running his $7 billion Stanford Ponzi scam that bilked thousands of investors. The scheme involved the sale of CDs from his bank in Antigua.

Receiver Paul Janvey contends that Romero and certain other consultants did not ask the most basic questions about Stanford’s bogus banking empire. Romero was invited to serve on Stanford’s International Advisory Board after sitting next to him at an inaugural ball for President George W. Bush in 2001.

Romero received $1 million in fees for his role as consultant-fixer over issues involving business and politics in Central America. During testimony, he claimed that he had no idea Stanford was committing fraud and said that he too was deceived.

He is not the only one that Janvey is going after. Ex-Texas Lt. Governor Ben Barnes was purportedly paid $5 million, while ex-Houston Mayor Lee Brown was paid under $300K. Both will be allowed to keep all of the money if they can persuade a jury that their work with Stanford was conducted in good faith and that the services provided were the reasonable equivalent in value to how much they were paid.

Unfortunately it is investors who lose out when they become the victims of a Ponzi scam. Please contact Shepherd Smith Edwards and Kantas, LTD LLP today. Our Texas securities fraud lawyers are here to help investors recoup their losses.

Ex-envoy who aided Ponzi schemer Stanford must pay $758,000, Dallas jury decides, The Dallas Morning News, February 13, 2015

Former U.S. diplomat implicated in Stanford Ponzi scheme, CNBC, January 22, 2015

Texas jury rules U.S. ex-diplomat must repay over $700,000 in Ponzi scheme, Reuters,


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

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

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

January 31, 2015

Sun Antonio Spurs Star Tim Duncan Files Texas Investment Adviser Fraud Case

NBA All-Star Tim Duncan is suing his investment adviser for securities fraud. The San Antonio Spurs basketball player says that his financial representative, Charles Banks, made investment recommendations based on conflicts of interest. Duncan claims that because of this he sustained substantial financial losses. According to one source, the NBA star lost more than $20 million.

In his Texas securities case, Duncan says that Banks, who gave him investment advice for seventeen years, took advantage of their relationship for personal gain. Duncan claims that Banks suggested he invest several million dollars in beauty products, hotels, sporting goods, and wineries that the latter either had a financial stake in or owned. The NBA basketball player also says that Banks was able to garner a $6.5 million bank loan using Duncan’s forged signature.

Unfortunately, professional athletes are targeted by financial fraudsters. With their large incomes and, in some cases, inexperience with managing their money and investments, there are scammers who will take advantage of their investment adviser relationship with them to try to make money. Because pro athletes can only play at the NBA, NFL, MLB, and NHL levels for a certain amount of years, unexpected and substantial financial losses caused by securities fraud may prove devastating for athletes and their families.

Contact our Texas securities fraud law firm today. Shepherd Smith Edwards and Kantas, LTD LLP represent professional athletes and other individual investors in recouping their investment fraud losses. Retaining legal representation increases your chances of recovering most if not all of your bilked funds.

Tim Duncan sues former business adviser for over $20 million in losses, SBNaton, January 31, 2015

How to scam an athlete, ESPN, April 22, 2011


More Blog Posts:
St. Louis Rams Quarterback AJ Feeley and US Soccer Player Heather Mitts Are Among Professional Athletes Allegedly Targeted in Ponzi Scam, Stockbroker Fraud Blog, September 7, 2012

Professional Athletes, Celebrities Often Targeted for Securities Fraud, Stockbroker Fraud Blog, August 14, 2013

Hanson McClain Sues Investment Adviser, Ameriprise Financial Services Over Client Information, Institutional Investor Securities Blog, January 12, 2015

January 22, 2015

Texas State Securities Board Was Special Prosecutor in $1M Securities Fraud Case

Alberto Alba Villareal was sentenced to five years behind bars for defrauding investors in a $1 million Texas securities fraud. Villareal was convicted of theft of property for stealing money. The funds he procured were supposed to go toward funding a new insurance company. The Texas State Securities Board was a special prosecutor in the case. Villareal is from South Texas.

As part of his sentence, Villarreal must pay complete restitution to the investor who purchased a $1 million investment contract in Nafta Holdings LLC, which was the new insurer’s controlling company. Villareal must also serve ten years probation.

According to court testimony and his indictment, Villareal took part in a number of financial deceptions to raise funds for the controlling company, even telling the investor that the Texas Insurance Code mandated that there be $4 million in capital and additional cash to open a new insurance company—even though the amount he quoted was about twice what the law actually stipulated.

Villareal allegedly made it seem as if he had raised half of the money and that investors' funds would go into escrow until the threshold was established. Instead, he used some of their money for his personal expenses, including yacht payments and mortgage payments, which were past due. Investor funds also went toward insurance claims to policyholders with other insurers that he controlled.

The state’s Department of Insurance also gave evidence in the Texas securities case.

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

South Texas man sentenced to five years for $1 million securities fraud, theft, inForney, January 20, 2015


More Blog Posts:
Orders Dallas Man to Pay Over $1.4M in Restitution, Penalty Over Texas Securities Scam Involving Forex Commodity Pool, Stockbroker Fraud Blog, January 12, 2015

NASAA Wants Life Partners Held Accountable for Texas Securities Act Violations, Stockbroker Fraud Blog, December 28, 2014

Standard & Poor’s to Pay Almost $80 Million to Resolve SEC Charges Over Ratings Fraud Involving CMBSs, Institutional Investor Securities Blog, January 21, 2015

January 12, 2015

Orders Dallas Man to Pay Over $1.4M in Restitution, Penalty Over Texas Securities Scam Involving Forex Commodity Pool

The U.S. Commodity Futures Trading Commission says that a federal court has issued a supplemental Consent Order of Permanent Injunction mandating that Steven Lyn Scott pay over $760,000 in restitution, a $700K penalty, as well as post-judgment interest for his involvement in a Forex commodity pool scam. It was the U.S. District Court for the Northern District of Texas that put out the order, which comes after a CFTC enforcement action charged the Dallas resident with customer fund misappropriation, solicitation fraud, and registration violations related to running a commodity pool scam.

According to The Court, from early January 2009 through at least the end of March 2011, Scott fraudulently solicited a minimum of $1,146,000 from over 40 pool participants for their involvement in pool investment vehicles that were to trade in contracts, off-exchange agreements, or transactions in foreign currency on a margined or leveraged basis. Many of the participants lived in Texas and included his friends, relatives, and others.

A May 5, 2014 Consent Order, issued earlier by this same court, noted that Scott invoked the name of his entity Stewardship Financial Exchange when pursuing pool participants. He is accused of guaranteeing returns of 2-5% a month for participants that signed up for six months.

The Order found that instead of trading the funds of pool participants, Scott misappropriated a chunk of the money into his corporate and personal accounts and then used the cash to cover his own spending. He also took participants’ money to pay supposed interest and principal to participants, much like in a Ponzi scam.

Our Texas securities fraud lawyers represent individual investors and institutional investors in recouping their losses.

Federal Court in Texas Orders Dallas-based Steven Lyn Scott to Pay $766,625.30 in Restitution and a $700,000 Penalty to Settle Charges of Solicitation Fraud, Misappropriation, and Registration Violations in Connection with a Forex Commodity Pool Scheme, CFTC, December 22, 2014


More Blog Posts:

NASAA Wants Life Partners Held Accountable for Texas Securities Act Violations, Stockbroker Fraud Blog, December 28, 2014

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

Money Manager Paul Greenwood Gets 10 Years in Prison for $1.3B Investment Fraud, Institutional Investor Securities Blog, December 4, 2014

December 28, 2014

NASAA Wants Life Partners Held Accountable for Texas Securities Act Violations

The North American Securities Administrators Association wants the Texas Supreme Court to rule that Life Partners Holdings Inc. has to face a class action securities lawsuit for selling unregistered securities. The state’s high court is set to determine whether to reverse a lower appeal court’s ruling to reinstate a case that accuses the company of selling the securities.

According to the group of securities regulators, violations of the Texas Securities Act were committed when Life Partners sold fractional interests in life insurance polices to investors and that this grounds for a case. The company wants the previous ruling, which found that life settlement contracts are not insurance contracts but are, in fact, investment contracts that are regulated under securities laws, overturned. Life Partners maintains that state securities law does not govern its product.

The putative class action securities case contends that three years ago, Life Partners was involved in a scam that involved offering and selling securities that were unregistered. A trial judge rejected the plaintiffs’ claims, accusing them of submitting a frivolous pleading.

Now, Life Partners wants the high court to rule that its products are different from the traditional securities that fall under Texas securities law. The company contends that profits from life settlements are connected only to the discounted buy price negotiated when Life Partners acquires the underlying policies that investors buy into.

Life Settlements
Investors purchase the right to death benefits, with the original owner of a policy getting paid a specific amount upfront. Meantime, investors keep paying premiums, hoping to ultimately get back more than they invested. The shorter a policyholder’s life expectancy, the more likely an investor is to make a profit.

In 2012, Texas regulators accused Life Partners of committing fraud when it gave investors “significantly shorter” life expectancies for the insured parties than what they should have given in order inflate revenue. In their complaint, the state said that as of 12/31/10,and of the 3,879 policies it held, Life Partners, 81% of the policies exceeded the life-expectancy estimates given to investors. The SEC filed its own civil case over this matter.

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

Regulators Say Texas Treats Life Settlements As Securities, Law360, December 16, 2014

Waco based company ordered to pay $46.8 million in SEC fraud suit, KXXV, December 3, 2014

Texas Securities Act

NASAA


More Blog Posts:
Atlas Energy’s Oil and Gas Private Placement May Not Be Such a Good Investment for Outside Investors, Stockbroker Fraud Blog, December 13, 2014

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

Money Manager Paul Greenwood Gets 10 Years in Prison for $1.3B Investment Fraud, Institutional Investor Securities Blog, December 4, 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 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

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

November 5, 2014

Texas Pension Fund Sues Tesco For Securities Fraud

According to the Irving Firemen’s Relief and Retirement Fund, Tesco PLC and its directors misled investors, purportedly causing the Texas pension fund to buy the company’s stock at prices that were artificially inflated. Because of this, says the fund, it sustained substantial losses when Tesco announced in September that it had overstated profits because of accounting irregularities.

The supermarket chain’s shares plunged after it disclosed that certain income was booked prior to being earned and costs were identified after they were incurred. Last month, Tesco said that it had overstated profits by $422 million.

The Irving pension fund wants to get class action status. It wants to represent Tescho shareholders who bought the company’s American depository receipts, representing one ordinary share each, between February 2 and September 22, 2014. In its securities fraud case, the Texas fund contended that Tesco purposely deceived the public.

IFRRF is for retired firefighters. The pension fund is funded through the Texas city of Irving, its participants’ contributions, and investment earnings.

Meantime, a report from an independent probe by Deloitte into the accounting overstatement will be sent to regulators. Even U.K.’s Financial Conduct Authority has said it would look into the matter.

Shepherd Smith Edwards and Kantas LTD LLP represents investors who are the victim of securities fraud to get their money back. Our Texas securities lawyers represent individual investors and institutional investors.

Irving pension fund sues Tesco for fraud
, Pensions and Investments, October 24, 2014

Irving (Texas) Firemen’s Relief and Retirement Fund

Tesco Gets More Bad News as Pension Fund Sues in U.S., Bloomberg, October 4, 2014


More Blog Posts:

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

SEC Adds Children and Spouses of Texas Wyly Brothers to Securities Fraud Case Following $187M Verdict, Stockbroker Fraud Blog, October 28, 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

October 30, 2014

Ex-LPL Financial Adviser, James Bashaw from Texas, Lands at New Brokerage Firm

James “Jeb” Bashaw, the former star financial adviser at LPL Financial (LPLA) from Texas is now registered with International Assets Advisory, a small brokerage firm. LPL Financial fired Bashaw last month over allegations involving selling away. Then, for a while this month, he was with Wunderlich Securities Inc.

Selling away typically involves engaging in private securities transactions sans the required written disclosure or brokerage firm approval. It can also include borrowing from a client, as well as engaging in a transaction that is a potential conflict interest, again without the required disclosure in writing or firm approval.

Responding to the selling away allegations, Bashaw noted that he was “home supervised” and underwent more than a dozen perfect audits while affiliated with LPL. After his firing, Wunderlich took steps to hire Bashaw but there was a delay in transferring his license to the firm. In the end, the broker-dealer and Bashaw reportedly decided not to pursue a working relationship.

In 2011, Bashaw was ranked the number one financial adviser in Texas. He founded a dually registered firm in Houston, which was one of the biggest affiliated LPL practices. He reportedly managed assets of $3.8 billion.

In other LPL Financial news, this week Mark Casady, its chief executive, apologized to shareholders for the time it has taken to resolve the company’s compliance issues. The problems have cost the brokerage firm millions of dollars in settlements, restitution payments, and fines.

Casady’s statement comes a week after parent company LPL Financial Holdings Inc. announced that the broker-dealer expected to incur some $23 million in charges to settle undisclosed regulatory issues. That’s $18 million more than what had been anticipated. Following the announcement, LPL shares dropped 7%.

LPL said the regulatory matters primarily involve LPL Financial’s policies, systems, and procedures. Without going into detail, Casady said that the nature of the issues made it hard to identify or evaluate the “timing or magnitude of their resolution.”

For the last two years, LPL Financial has been contending with regulators over different issues. Earlier this month, regulators in Massachusetts announced that LPL had consented to pay back senior investors $541K for surrender charges from switching variable annuities. In June, LPL Financial was told to pay $820K in restitution and a $2 million fine to Illinois regulators for not properly mantaining books and records that documented 1035 exchanges.

Last year, FINRA fined LPL $7.5 million for close to three dozen system failures involving emails. The firm paid investors in Massachusetts $4.8 million in restitution related to their purchase of nontraded real estate investment trusts.

Our Texas broker fraud lawyers represent investors who wish to recoup their losses. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.

Ex-LPL Adviser’s Talks With Wunderlich Scuttled, The Wall Street Journal, October 14, 2014

CEO Mark Casady apologizes to LPL Financial shareholders for compliance missteps, Investment News, October 30, 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

Former LPL Financial Broker Must Pay Almost $2 Million For Bilking Clients, Including Elderly Investors, Stockbroker Fraud Blog, August 29, 2014

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