We have represented thousands of investors nationwide and recovered losses and other damages* for them from stockbrokers and their firms *Results will vary depending on the facts of each case

The US Securities and Exchange Commission has filed charges against broker Demitrios Hallas accusing him of making unsuitable investments in five clients accounts and misappropriating over $170K from these customers. The regulator is seeking a permanent injunction and the return of ill-gotten gains, along with interest and penalties.

According to the SEC, Hallas repeatedly traded investments that were not appropriate for these customers. In just over a year, the broker allegedly traded 179 daily leveraged ETFs and ETNs. both of which are generally “risky, complex, and volatile.” The net loss involving all positions was about $150K.

His customers were not experienced or sophisticated investors and they could not handle the degree of volatility and risk to which he exposed them. Meantime, Hallas made about $128K in fees and commission.

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Federal Reserve Imposes First Fine to a Bank Over A Volcker Rule Violation
For violating the Volcker Rule’s ban on making risky market bets, Deutsche Bank (DB) must pay a $157M fine for not making sure its traders didn’t make such bets and for allowing its currency desks to engage in online chats with competitors, during which time they allegedly disclosed positions. It was just last year that the German lender admitted that it did not have sufficient systems in place to keep track of activities that could violate the ban.

Under the Volcker Rule, banks that have federal insured deposits are not allowed to bet their own funds. They also are supposed to makes sure that when their traders help clients sell and buy securities, they aren’t engaging in bet making.

For the system lapses, the Federal Reserve fined Deutsche Bank $19.7M. The remaining $136.9M fine is for the chats and because the bank purportedly did not detect when currency traders were revealing positions or trying to coordinate strategies with competitors.

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The US Securities and Exchange Commission is charging Matthew Fox and his Wayne Energy LLC with securities fraud. The regulator brought its Texas securities case in federal district court in the city of Sherman.

According to the Commission’s complaint, Fox raised about $950K for a joint venture that was supposedly involved in reworking and recompleting an oil and gas well. However, contends the SEC, Fox raised the funds by recycling offering documents from another oil and gas company that he previously ran (that company failed) rather than customizing the paperwork to this new venture and its specific risks.

Prior to setting up Wayne Energy in 2015, Fox had run Frisco Exploratory Company and it is the latter’s offering documents that he used. The Commission claims that the offering documents made a false statement, which was that Wayne Energy would not commingle its own money with the joint venture’s funds. The documents also falsely stated that the oil and gas company was licensed as an operator with the Texas Railroad Commission.

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Former Wells Fargo and LPL Financial Broker Receives 41-Month Prison Term for Elder Financial Fraud
Robert N. Tricarico, an ex-broker for both Wells Fargo Advisors (WFC) and LPL Financial (LPLA), will serve 41 months behind bars and pay restitution of over $1.2M after he pleaded guilty to elder financial fraud. The Securities and Exchange Commission, which brought a civil case against Tricarico, has barred him from the securities industry.

Court documents note that from 1/2010 to 6/2013, Tricarico was the financial adviser for a sick and elderly investor. He misappropriated over $1.1M from her by writing a number of checks to himself without the client’s consent, misappropriated checks written to her, liquidated her coin collection, and used her funds for his own expenses.

He has also admitted to bilking two other victims of $20K when he falsely represented that their money would go toward a business venture. He kept their money for himself.

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Investor Awarded Over $1M After Allegedly Misleading Sales Pitch by Wilbank Securities Broker

A Financial Industry Regulatory Authority panel has awarded investor Grace S. Huitt over $1 million in her broker fraud claim against Wilbanks Securities. According to Huitt, one of the firm’s brokers presented her with a sales pitch about the ING Landmark Variable Annuity that not only was misleading but also promised too much and then under-delivered. She alleged breach of contract, fraud, breach of fiduciary duty, and negligent supervision.

Huitt claims that when she bought the variable annuity in 2008, she was told that it came with a guaranteed 7% compound yearly return. Other investors who also had made investment puchases through Wilbanks Securities reportedly claimed similar problems with what they were promised.

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Business partners Janniece Kaelin and Robert Allen Helms have pleaded guilty to bilking investors of up to $20M in a Texas-based Ponzi scam. The oil and gas financiers used the funds raised for energy ventures to cover their own expenses from 1/2010 to 12/2013.

The US Securities and Exchange Commission filed a securities fraud lawsuit against Kaelin, Helms, and their companies Iron Rock Royalty Partners LP and Vendetta Royalty Partners LTD in 2013. According to the regulato, they misled investors about their professional experience, meantime raising almost $18M that were supposed to go toward royalty interests in oil and gas.

Included among the alleged purchases they made: using investors’ money to pay for a 3 1/2-week trip around the world and paying for the more than $247K wedding of Kaelin’s daughter in Hawaii.

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Hedge fund Whitebox Advisors has filed a lawsuit against Bank of New York Mellon (BNY Mellon) over revenues from Puerto Rico’s sales tax bonds, which are commonly called COFINAs, that support $17 Billion of the island’s debt. Currently, the US territory is continuing to struggle to pay back the $70 Billion of debt it owes to creditors and BNY Mellon is a trustee for the island. (A number of hedge funds aside from the plaintiff, hold about $2.5 Billion in senior COFINA bonds, but they are not part of this case.)

In its lawsuit, brought in state court in New York, Whitebox Advisors accused BNY Mellon of breaching its duties to senior COFINA bondholders by continuing to make payments to junior creditors even after the US territory indicated that it wants to make concessions related to different kinds of debts. The hedge fund wants a court order stopping further payments to junior creditors, as well as a statement declaring that BNY Mellon has a conflict of interest. The plaintiff is also seeking monetary damages.

This week, the island is set to begin confidential talks with COFINA creditors as well as holders of competing general obligation debt. Creditors have until May 1 to arrive at mutually agreed upon settlements. The deadline was put into place, temporarily halting creditor lawsuits, to give the federally appointed oversight board a chance to work out a debt restructuring deal outside of court. At this moment, an extension to the freeze is unlikely.  After that, the board is allowed to try to place Puerto Rico into quasi-bankruptcy proceedings.

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A new restructuring agreement has been reached between the Power Utility Company of Puerto Rico, referred to locally as PREPA, and its creditors on how to restructure $8.9 billion in Puerto Rico debt.The deal, which must still be approved by the federally appointed oversight board, comes before the May 1 deadline that the US territory must meet to arrive at such settlements with creditors. After May 1, members of the US-government appointed federal oversight board would have the authority to effect a quasi-bankruptcy process and make creditors agree to deals that likely would not favor creditors.

Of the about $70 billion of municipal debt that Puerto Rico owes, roughly $9 billion involves PREPA. Puerto Rico Governor Ricardo Rossello issued a statement noting that if approved, the agreement between PREPA and bondholders could save $2.2 billion in debt servicing expenses for five years while lowering customer electric bills by $90/year during the same period.

Under the original agreement, PREPA bondholders were to trade their bonds for new securities while receiving a 15% discount. With this new agreement, creditors would take the same reduction but maturities would be extended to 2047. Additionally, under the new deals, the requirement of an investment grade rating to close the deal would be eliminated. Insurers, such as Assured Guaranty and MBIA Inc., also consented to another $300 million in deferral of principal during the first six years.

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Credit Suisse Unit and Ex-Investment Adviser Settle SEC Charges, Pay $8M Fine
Credit Suisse AG (CS) unit Credit Suisse Securities and Ex-investment adviser Sanford Michael Katz have settled SEC charges accusing them of improperly investing the funds of clients in “Class A” mutual fund shares instead of “institutional” shares that were less costly. According to the regulator, the firm and Katz did not adequately disclose the conflict of interest presented by choosing the Class A investment, which allowed them to profit more at investors’ expense. They are accused of breaching their fiduciary duties.

The SEC’s orders state that Credit Suisse made about $3.2M in 12b-1 fees that could have been avoided. According to the Commission, about $2.5M of those fees came from Katz’s clients. The regulator said that the firm did not put into place policies and procedures to prevent fiduciary breaches.

Both Credit Suisse and Katz settled the SEC charges without denying or admitting to the regulator’s findings. Together, they have to pay over $3.2M of disgorgement, over $577K of prejudgment interest, and an over $4.1M penalty. A fair fund has been set up to compensate clients.

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In federal court in Texas, Charles Banks, the former financial adviser to ex-NBA star Tim Duncan, has pleaded guilty to wire fraud. Banks admitted to misleading Duncan into guaranteeing a $6M loan to a company that had financial connections to the ex-advisor.

Duncan, who retired from professional basketball in 2016, claims that he lost more than $20M through deals he was involved in because of Banks. The two first started working together in 1997 when Banks was employed with CSI Capital Management Inc. and Duncan was an NBA rookie. After Banks left the firm he continued working with Banks.

Banks encouraged Duncan to lend a company, Gameday Entertainment, $7.5M. The company then obtained a $6M bank loan using what Duncan contends was his forged signature. Banks was Gameday’s chairman at the time.

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