Articles Posted in Investor Fraud

The US Securities and Exchange Commission has filed fraud charges against investment adviser Amrit J.S. Chahal, who founded Kane Capital investment Group, LLC. Chahal is accused of using his company to solicit about $1.4M from about 50 people, some of them friends and family members. Now, the regulator wants a permanent injunction, penalties, and disgorgement.

According to the SEC’s securities fraud complaint, from at least 2/2015, Chahal targeted prospective investor by telling him he was a seasoned trader who could make clients “above-market returns” by employing a trading strategy whose risks were low. In truth, contends the Commission, Chahal had no previous substantive experience in the securities industry or in trading securities for others.

Investors gave Chahal their money with the understanding that he would use the funds to buy and sell futures, options, and commodities. He told them they would have to pay a $2.5% yearly fee and a performance-based fee that was 10% of an investor’s returns that went beyond a yearly 30% return rate. Chahal also falsely claimed that Kane Capital employed the most current software to help it garner the “highest possible profit” from every investment, with a focus on choosing investments that were high-yield and low-risk. In truth, said the Commission, Chahal “traded risky options and margins,” as well as sold and purchased commodities and futures.

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If you are an investor that suffered financial losses from investing in either the Triloma EIG Energy Income Fund – Term 1 or the Triloma EIG Energy Income Fund, you may have grounds for a securities fraud claim to try to recoup your money. At Shepherd Smith Edwards and Kantas, LTD LLP we have been speaking with Triloma Fund investors to help them explore their legal options. Contact our investor fraud law firm today to request your free case consultation.

According to their website, the Triloma Funds are unlisted investment companies that have mostly an international portfolio of “privately originated energy company and project debt.” Investors included individual investors and institutional investors.

However, late last month, the Triloma Funds’ Board of Trustees approved a liquidation plan for each of the funds, so as to facilitate their dissolution. The Funds will refrain from any business activities besides those having to do with shutting down operations. Meantime, monthly distributions and reinvestment plans for both funds have ended. An initial cash distribution related to liquidation is scheduled, as is a second one.

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The LJM Preservation and Growth Fund (LJMIX, LJMAX, LJMCX) is facing allegations that it made false and misleading statements to investors. In particular, the fund represented that it was appropriate for capital preservation investors who wanted conservative growth of their account. In reality, the mutual fund exposed investors to high risks that made them vulnerable to massive losses when it lost nearly all of its value within two days, dropping more than 80% earlier this month. In a filing with securities regulators, The LJM Partners, LTD., which is based in Chicago, announced that it was shuttering operations by March 29 and is going into liquidation.

The latest earnings report for the fund, filed at the end of October, noted $768 million of net assets. Reuters reports that the fund’s net assets were $812 million at the start of month but that is now reduced to $14 million. After this massive drop, the fund announced that it would no longer be open to new investments. Soon after, investors brought a class action securities lawsuit against the mutual fund. The plaintiffs are alleging that the LJM Preservation and Growth Fund violated the Securities Act and misled them by claiming it was committed to “preserve capital, particularly in down market.”

LJM, operated by Anthony Caine and Anish Parvatanen, was among a number of companies involved in selling liquid alternative funds that were complex and came with high fees. Investors that sought these funds out were generally hoping to enhance their returns even while reducing the risks. However, the fund did not accomplish that goal. It instead embarked on a risky strategy involving complex options trading and other investments that are not appropriate for any investor seeking capital preservation.

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SEC Accused Investment Adviser of Profiting from Cherry Picking
The US Securities and Exchange Commission has filed a civil fraud case against Strong Investment Management, which is a California-based investment adviser, and its president/owner Joseph B. Bronson. The regulator is accusing them of running a cherry picking scam that defrauded the firm’s clients.

The Commission contends that Bronson used Strong’s omnibus account to trade securities but would wait to see how they performed during the day before distributing them to certain client accounts. Meantime, Bronson purportedly made healthy profits at cost to clients by cherry picking the trades. He is accused of giving himself trades that were profitable while sending unprofitable ones to firm clients.

The SEC’s complaint contends that in Forms ADV, Bronson and Strong misrepresented trading and allocation practices by falsely stating that every trade would be allocated according to the terms of pre-trade allocation statements with no preference granted to any account. Bronson’s brother, ex-Strong chief compliance officer John B. Engebreston, is accused of not fulfilling his job by failing to make sure that Strong’s policies and procedures for trade allocation were followed. He also is accused of “repeatedly” ignoring “red flags” when it came to Strong’s allocation practices.

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Scottrade is Accused of Improper Sales Practices Involving Retirement Accounts

Massachusetts Secretary of the Commonwealth William Galvin has filed a complaint against Scottrade accusing the brokerage firm of engaging in improper sales practices that it knew violated the US Department of Labor’s fiduciary rule regarding impartial conduct standards. Under the rule, advisors and their firms are obligated to act in a fiduciary capacity when making investment recommendations, as well as act in their clients’ best interests.

In his complaint, Galvin is contending that Scottrade employed a culture that includes “aggressive sales patterns,” and that the firm and its agents failed to abide by its duty to Massachusetts retirees between 12/2015 and 6/2016 when it ran a number of national call nights that included the incentive of raffle tickets for those who cold called customers. Scottrade also conducted quarterly sales contests offering at least $490K in prizes. This included the “Q3 Win and Retain Sales Contest “that offered $285K and paid out $2500/agent to the top 25 branches according to percentage increase in new net assets brought in.

The SEC has filed fraud charges against BitFunder and its founder John E. Montroll. According to the regulator, both of them ran an unregistered securities exchange and committed fraud against those who used the exchange by misappropriating bitcoins and not disclosing a cyberattack in which more than $6,000 bitcoins, worth about $775K, was stolen.

Montroll is accused of selling purported investments that were actually unregistered securities and then misappropriating money from the investments. The offerings were “shares” of “Ukyo.Loan,” also known as “Ukyo Notes.” Buyers were told that money from the sales would go toward private investments and he promised them a .05% daily interest rate.

Instead, Montroll allegedly used some of the proceeds to cover his business and personal expenses and to “replenish” the bitcoins he is accused of misappropriating from an earlier offering. Also, after the cyberattack, Montroll allegedly made it appear as if BitFunder was profitable even though it had a bitcoin deficit.

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State Regulator Orders Cessation of $4M Oil and Gas Offering
In an Emergency Cease and Desist Order, the Texas Securities Commissioner has ordered Parker R. Hallam and Jason A. Gilbert, two Dallas residents, to stop their efforts to raise $4.4M in an oil and gas offering. The two men are accused of fraud.

Hallam and Gilbert have been offering investors interest in a well project that would be based in Kansas. They reportedly intend to take $1M of investor funds as a management fee payment to SourceRock Energy Phoenix Prospect LP, which is the company that they do business as. Meantime, the rest of the funds would go toward leasing and building the well field. The two men have not, however, told investors that drilling costs are estimated to be at just around $750K.

Hallam also is accused of failing to tell investors that in 2016, the US Securities and Exchange Commission sued him and others over their alleged involvement in an $80M oil and gas fraud. Also, according to the Texas securities regulator, Gilbert failed to disclose that the Internal Revenue Service previously filed $548K in tax liens against him. The government agency also filed liens against Hallam, who has yet to pay nearly $143K of what he owes.

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Massachusetts Secretary of the Commonwealth William Galvin has filed charges against investment adviser Thomas Riquier for allegedly defrauding investors of at least $1M in a real estate scam that has gone on for more than a quarter of a century. According to the administrative complaint, Riquier solicited funds from people, mostly older investors (some of them his firm’s clients), to buy property that was then to be sold at a profit. His employer, United Planners Financial Services of America, is charged with failure to supervise.

In its investment adviser fraud case, the regulator claims that investors’ money was used instead to buy property already belonging to Riquier. The property has yet to be improved or sold. It has not rendered any returns for investors. The state regulator notes that because the alleged scam has been going on for so long—26 years—a number of investors have passed away. The rest of them have yet to make money from the venture.

Riquier is also accused of soliciting over $830K in private loans from clients. Galvin said that this violates federal and state laws.

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SEC Accuses Atlanta Man of Misusing Over $1.2M in Investor Funds

In an enforcement action, the US Securities and Exchange Commission is accusing Timothy S. Batchelor of misusing over $1.2M in investor monies. The funds were supposed to go toward the development of a submarine vessel and to businesses involved in national security.

According to the regulator’s complaint, of the $2.4M that Batchelor raised from investors through the Specter Ventures Fund II, he improperly spent half of the money, including almost $250K to buy new cars and about $225K to cover student loans. He allegedly moved thousands of dollars in investor monies to his own relatives. Batchelor also is accused of trying to conceal his actions by faking a document that misrepresented unauthorized expenditures as a loan.

The Financial Industry Regulatory Authority is warning investors to watch out for financial schemes in which the fraudsters are pretending to be the self-regulatory organization. FINRA released its Investor Alert noting that there have been scammers using its FINRA logo and name. In some instances they are even forging the signature of FINRA president and CEO Robert W. Cook to try and solicit funds for fraudulent investments. Use of FINRA’s name appears to be geared toward making the scheme appear legitimate.

For example, an investor contacted the SRO to report one instance that purportedly involved the fraudster sending a letter that was supposedly from Cook and guaranteeing a proposed investment. The letter, however, had a number of errors, including mistakes involving FINRA’s name and its leadership titles. Another alleged fraud involved e-mail pitches, again purportedly from Cook. The correspondence told targets that their outstanding inheritance fund had been “approved for release.” They were instructed to go abroad (beyond the jurisdiction of US authorities or regulators) to obtain this money. Meantime, the targets were asked to share certain personal data.

A regulator imposter fraud might ask the victim to pay an advanced fee. In such scams, investors are asked to pay certain fees related to the purchase of stock shares that, in truth, are not doing well or are “virtually worthless.” However, upon sending the funds, investors rarely see the money returned to them or the funds that a stock buyback was supposed to render. The fraudster may even ask for more money.

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