Broker-Dealer Owner and His Firm Settle SEC Case Alleging Overconcentration of Investor Money In Illiquid Investments
Jason Vanclef and his brokerage firm VFG Securities Inc. have settled the Financial Industry Regulatory Authority’s case accusing them of not adequately supervising their brokers so that clients’ portfolios did not end up concentrated in illiquid investments. Vanclef and VFG Securities, however, are not denying or admitting to the claims made in the complaint.
According to FINRA, from 11/2010 to 6/2012, nearly 95% of the broker-dealer’s revenue came from direct participation programs (DPP) and nontraded real estate investment trusts (nontraded REIT) sales. The illiquid investments were sold retail customers.
FINRA claimed that Vanclef had used “The Wealth Code,” which was the book that he authored, as a sales tool to promote investing in DPPs and nontraded REITs and to attract potential investors. The settlement with the regulator notes that in the book Vanclef repeatedly touted both types of illiquid investments as offering capital preservation and better returns—claims that FINRA said are “inaccurate and misleading” and conflict with information that the firm offered in prospectuses for the nontraded REITs and DPPs.
As part of the settlement, Vanclef was suspended from the securities industry for 10 days and VFG was fined $10K.
Massachusetts Regulator Accuses Software Developer of Involvement in Trading Scam
Massachusetts Secretary of the Commonwealth William F. Galvin is seeking to ban Bruce S. Horowitz and his trading software company from engaging in securities business in the state. Horowitz and his company, Massive Abundance, are accused of fraudulently taking investors money to trade in securities but then not executing the trades.
According to Galvin, for the past two years, Horowitz has solicited money from different Massachusetts investors whom he met through “meet-up” financial adviser seminars about equity index annuities. He purportedly told prospective investors that he had developed a proprietary trading software that would render high returns and profits through trading in equities and futures. He charged investors upfront fees of at least 200% of the value of their trading capital.
For example, noted Galvin’s complaint notice, one 54-year-old gave Horowitz $15K to invest and was charged $10K in upfront fees. The investor also received a memorandum of understanding that the company’s trading fee would be comprised of half of any trading profits. However, Horowtiz and Massive Abundance never invested the investor’s $5K trading capital. Horowitz claims that this was because his software system was not able to “properly manage” the market volatility that occurred in 2015.
Galvin said that Horowitz and his company were never registered to be active in the securities market in Massachusetts. He is seeking full restitution for investors and demanding that Horowitz and Massive Trading stop all business activities in the state.
Utah Man, Accused of Bilking Nearly 5,700 Investors in $25M Fraud, Gets 10 Years in Prison
Curtis DeYoung, who pleaded guilty to mail fraud and making a false statement, will serve 10 years in prison for his involvement in a $25M fraud. According to federal prosecutors, DeYoung bilked almost 5,700 victims when he stole millions of dollars from their self-directed individual retirement accounts at his American Pension Services.
In April 2014, the US Securities and Exchange Commission sued DeYoung for defrauding the investors. They claimed that as early as 2005, he used customer monies without their consent to make risky and unauthorized investments in companies owned by his friends.
According to Deseret News, one investor, 90-year-old Darlene Snow, told a federal judge that she and her late husband lost their retirement funds because of DeYoung. She noted that their money was supposed to take care of her after her husband’s death. Another couple and their adult children who were also bilked said that they’d known DeYoung for decades and they had been his neighbors for years.
Over the years, Shepherd Smith Edwards and Kantas, LTD LLP has helped thousands of investors to recoup their investment losses. Contact our investment fraud lawyers today and ask for your free case consultation.
Small broker-dealer owner settles with FINRA over allegations of concentrating clients in illiquid alts, InvestmentNews, November 22, 2016
Utah man gets prison in $25M Fraud Case with 5700 Victims, Fox13 Now, November 22, 2016
SEC Charges Utah-Based Plan Administrator With Defrauding Investors, SEC, April 30, 2014