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.)
Right before the suspension of the search engine’s shares, its market cap was higher than that of Tesla Motors Inc. It also was ahead of Twitter Inc., Sprint Corp., and American Airlines Group. Neuromama has had no financials reported since 2013.
According to Bloomberg, Neruomama’s chief marketer, Steven Zubkis, who also goes by the name Steven Schwartzbard, was previously sentenced to five years behind bars for bilking investors in a $1.8M scam using misrepresentations related to a Las Vegas casino. Also, SEC sued him in the 1990’s for a $12M penny stock scam. The regulator ordered him to pay over $21.6M.
Investors are attracted to the over-the-counter market because of the cheap stocks that may quadruple in worth just by their price going up by cents. Unfortunately, the OTC market is also a place where fraud can easily happen due in part to the lack of regulation. Pump-and-dump scams have been known to happen there.
Over $10M Penalties and Restitution Ordered in Commodity Pool Scam
A U.S. district court judge has entered a summary judgment against Amy L. Leben and Robert S. Leben in a commodity pool fraud case. The judgment is in a Commodity Futures Trading Commission enforcement action accusing the two of them of not registering as commodity pool operators and misappropriating the money of pool participants. Now, the Lebens must pay over $2.5M of restitution to victims, more than $109K in disgorgement, and over $7.6M of a civil monetary penalty.
The CFTC alleged that between 8/08 and 3/14, the Lebens, via the Structured Finance Group Corporation ( a commodity pool), fraudulently solicited and received at least $3.2M from at least a dozen investors to trade commodity futures contracts. According to the regulator, the Lebens traded just part of the pool participant funds in futures accounts under Amy’s name and the pool’s name. Net losses were suffered for most of the period.
The Lebens are accused of misappropriating at least $2M of investors’ money for their own spending while telling their victims that the funds would go toward buying U.S. Treasury debt obligations and commodities.
A $35B Stock, an SEC Halt and Suspicions of Manipulation, Bloomberg, August 16, 2016