Articles Posted in SEC

The Securities and Exchange Commission has filed fraud charges against Sentinel Growth Fund Management and its owner Mark J. Varacchi. The regulator is accusing the Connecticut-based investment advisory firm of stealing at least $3.95M from investors. Over $1M was allegedly used to resolve private litigation in which Varacchi was the defendant.

According to the Commission, Sentinel Growth Management Fund and Varacchi misrepresented to investors that their money would go to hedge fund managers to be invested. Instead, the investment advisor firm allegedly commingled investor money and manipulated account balances, activities, and investment returns as part of a securities fraud.

Now, the SEC wants disgorgement and penalties brought against Varacchi and his firm in this investment advisor fraud case.

Continue reading

Chicago Hedge Fund Manager Gets Over Four Years in $1.8M Fraud
Clayton Cohn is sentenced to more than four years behind bars and he will pay $1.55M in restitution for targeting military veterans in a $1.8M hedge fund fraud. Cohn is an ex-US Marine. He pleaded guilty to the criminal charges against him.

Cohn is accused of pretending to be a successful hedge fund manager to persuade clients to invest with his Marketaction Capital Management. Of the over $1.8M that was invested,he lost more than $1.5M and spent at least $400K on his luxury lifestyle and business investments.

The US Securities and Exchange Commission had brought civil charges against him in 2013 when they accused Cohn of soliciting investors through his Veterans Financial Education Network. The non-profit was supposed to help veterans handle their money. Instead, he diverted some of their funds toward himself. The regulator stayed its case against him following the federal indictments. Now, the civil fraud charges will proceed.

Continue reading

Citigroup is Accused of Overcharging At Least 60 Investment Advisory Clients
Citigroup Global Markets (C) will pay $18.3M to resolve Securities and Exchange Commission charges accusing the firm of overbilling clients and misplacing client contracts. According to the regulator’s order, at least 60,000 investment advisory clients were overcharged about $18M in unauthorized fees because Citigroup did not confirm the accuracy of the billing rates in its computer systems compared to the fees noted in client contracts and other documents. The firm also purportedly improperly collected fees even when clients suspended their accounts. The SEC says that the billing mistakes took place over a 15-year period.

The regulator also contends that the investment advisory firm has been unable to locate about 83,000 advisory contracts. Their absence made it impossible for Citigroup to correctly validate whether the fees that clients were billed are the same ones that they negotiated.

The SEC believes that affected clients paid Citigroup about $3.2M in excess fees.

Continue reading

The US Securities and Exchange Commission has filed an administrative case against Windsor Street Capital and John D. Telfer, its ex-anti-money laundering officer. The regulator’s enforcement division claims that the New York-based broker dealer did not file Suspicious Activity Reports for $24.8M of suspect transactions, including those connected to an alleged pump-and-dump scam.

The regulator claims that Windsor Street Capital, at the time known as Meyers Associates LP, and Telfer should have been aware of the suspect circumstances involving a lot of these transactions and conducted a probe—in particular, into transactions involving William Goode and Raymond Barton. These men are microcap stock financiers accused of running a multi-million dollar pump-and=dump scam.

The SEC has filed separate charges against them, as well as against Kenneth Manzo, Matthew Briggs, and Justin Sindelman. The five of them are accused of acquiring shares of dormant shell companies that were supposed to be part of the dietary supplement industry, falsely marketing products and news related to the company, and then dumping the shares onto the market for investors to buy at inflated rates.

Continue reading

Morgan Stanley Accused of Overbilling Investment Advisory Clients

The US Securities and Exchange Commission announced that Morgan Stanley Smith Barney (MS) will pay a $13M penalty to resolve charges accusing the firm of overbilling clients through billing system and coding mistakes and violating the custody rule regarding yearly surprise exams.

As a result, said the regulator’s order, Morgan Stanley has agreed to pay over $16M in excess fees because of billing mistakes that took place from ’02 to ’16. Investment advisory clients that were affected have been paid back the excess fees in addition to interest.

According to the Commission, Morgan Stanley overcharged over 149,000 investment advisory clients. The reason for this is that the firm did not put into place compliance policies and procedures that were designed reasonably enough to make sure that clients were accurately billed according to their advisory agreements. The SEC said that Morgan Stanley did not validate billing rates that were in its billing system against client billing histories, contracts, and other documents.

Continue reading

Investment Adviser Settles SEC Case for $575K
John W. Rafal, a Connecticut-based investment adviser, has agreed to settle US Securities and Exchange Commission charges for $575K. As part of the settlement, Rafal is admitting wrongdoing in a civil case that accuses him of bilking a client and then trying to mislead the SEC while lying to other clients about the regulator’s probe.

The SEC said that Rafal paid attorney Peter D. Hershman in secret for referring one of his client’s to Essex Financial Services, which is the firm that Rafal founded. He is no longer affiliated with Essex. Rather than disclose the referral deal to the older widow who was that client, Rafal and Hershman concealed the payments as “legal fees.” Even after Essex officers found out about and stopped the referral arrangement, the deal between the two men continued in secret. The SEC also said that Rafal responded to rumors that he had violated a securities law by emailing his clients and falsely stating that the regulator’s probe had been resolved. He also purportedly tried persuading the Commission that his arrangement with Hershing was over.

Essex Financial Services will pay $180K in disgorgement and interest to resolve charges connected to Rafal’s wrongful behavior. Herhsman will pay over $90K to resolve the civil charges accusing him of aiding and abetting the violations committed by Rafal. The two men agreed to a securities industry bar and from serving in the roles of director or officer for any publicly traded company. They also are no longer allowed to represent clients regarding SEC matters.

Continue reading

The US Securities and Exchange Commission is charging two brokers with securities fraud. The regulator claims that Donald J. Fowler and Gregory T. Dean fraudulently employed an in-and-out trading strategy that was not suitable for customers so that they could make more in commissions. Because of their actions, 27 customers alleged lost substantial amounts of money. Fowler and Dean are accused of violating the Securities Act of 1933 and the Securities Exchange Act of 1934, and Rule 10-B5.The Commission said that they examine trading patterns involving over two dozen of the brokers’ customer accounts.

The SEC contends that the two men did not engage in any due diligence to figure out whether their investment strategy could help customers obtain even the smallest profit. With their strategy, they engaged in the frequent purchase and sale of securities, which would both take place within a two-week or shorter timeframe. They charged customers a commission for every transaction. Meantime, Fowler and Dean were the only ones who had a chance of making a profit.

SEC Warns Investors to Look Out for Excessive Trading, Churning

Along with its announcement of this securities case, the SEC put out an Investor Alert cautioning the public about churning and excessive trading. In its alert, the regulator warned about red flags that may be signs of these types of fraud, including trading that a customer did not authorize, which is known as unauthorized trading, trading that happens more often than seems reasonable for a customer’s investment objectives and/or the level of risk that the portfolio can handle, and suspicious and/or unusually high fees.

Continue reading

The U.S. Securities and Exchange Commission is barring a number of market participants from the penny stock industry for their involvement in a number of purportedly fake initial public offerings of microcap stocks. The regulator says that investors were bilked because of these schemes.

Among those barred is Newport Beach, CA securities attorney Michael J. Muellerleile. He is accused of authorizing misleading and bogus registration statements that were employed in fake IPOs for several microcap issuers. The statements were generated to purportedly move unrestricted penny stock shares to offshore market participants. Muellerleile’s firm, M2 Law Professional Corp, attorney Lan Phuong Nguyen, and American Energy Development Corp. CFO Joel Felix are also charged in this microcap fraud case.

Nguyen allegedly signed misleading and false legal opinion letters. Felix is accused of making misleading and false statements. Earlier this month, the regulator suspended trading in American Energy Development.

Continue reading

The US Securities and Exchange Commission has filed securities fraud charges against Naris Chamroonrat of Thailand and American Adam L Plumer. The regulator contends that the two men ran a fake day-trading that collectively defrauded hundreds of investors in over 30 nations of over $1.4M. At least 180 of the investors are from the US, including several from New Jersey.

Chamroonrat purportedly recruited Plumer to bring in investors to engage in day trading via Nonko Trading, an unregistered broker-dealer. The firm promised low trading commissions, good leverage, and low deposit requirement minimums.

However, contends the regulator, rather than employing a live securities trading platform, the firm gave certain investors training accounts that simulated the execution and placement of their orders that were never actually sent to the markets. Instead, their money went toward Chamroonrat’s own expenses, payments to Plumer and others, and was used as Ponzi-like payments to investors who decided close their accounts. The Commission believes that the day trading scam purposely targeted novice investors who were more apt to make trades that were not profitable, less likely to attempt to take money out of their account, and more prone to assuming that their investment losses were from trading and not because of fraud.

Continue reading

Ex-Financial Adviser Who Worked for Texas-Based Firm is Barred by SEC After Defrauding Pro Athletes 
Ash Narayan, an ex-California financial adviser, has been barred by the US Securities and Exchange Commission. Narayan, who is accused of secretly receiving almost $2M from companies that he invested in on behalf of his professional athlete clients, agreed to no longer associate with advisory or brokerage firms to resolve the regulator’s allegations.

Narayan worked for Dallas firm RGT Wealth Advisors, but he was based in California as the managing director of its Irvine office. He also is accused of misrepresenting himself as a CPA and placing clients in unsuitable private investments. In October, the Certified Financial Planner Board of Standards issued a temporary suspension against him while an investigation was conducted into the allegations. RGT Wealth Advisers fired Narayan early this year.

According to the SEC, Narayan’s alleged fraud occurred between 2010 and 2016, during which time he directed $33M to a company that he was involved in and was in poor financial health. By settling, Narayan is not denying or admitting to the SEC charges.

Continue reading

Contact Information