Articles Posted in Securities 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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Last month, the Federal Energy Regulatory Commission announced plans to stop oil and gas pipelines from being able to structure themselves as Master Limited Partnerships (MLPs) in order to get an income tax allowance for rates that are cost-of-service. Under the existing model, MLP customers pay a price that is regulated, part of which takes care of corporate tax charges.

MLPs aren’t required to pay corporate taxes since they pass through entities that distribute pre-tax earnings to unit holders. The latter are the ones that pay the taxes.

Any new rule related to this matter would likely not go into effect until 2020. Still, the government agency’s news affected trading on a number of MLPs, including the Alerian MLP ETF (exchange traded fund), Energy Transfer Partners, TC PipeLines, Williams Partners, Crossamerica Partners, and several others.

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The US Securities and Exchange Commission has filed charges against Two Texas companies and their principals accusing them of senior financial fraud and running a $2.4M Ponzi scam. The regulator brought its complaint in the US District Court for the Southern District of Houston Division.

The SEC contends that from ’10 to ’17, Clifton E. Stanley and his The Lifepay Group, LLC allegedly persuaded at least 30 older people to invest about $2.4M in retirement savings—approximately $1.3M of which he is accused of spending on his own country club memberships, travel, general living expenses, and entertainment bills. Stanley and Lifepay purportedly did this by making empty promises and touting significant investment returns of up to 36% annually. Many of Stanley’s alleged targets were investors in their 80’s and 90’s who lived in Texas and Louisiana.

In Ponzi scam fashion, investors received $1.1M of “returns” on their investments, which were actually funds that came from later investors and not returns at all. Meantime, investments were touted as “safe” and were supposedly to go toward real estate projects that would make money.

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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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Santander Securities LLC has notified its Puerto Rico clients by letter that its San Juan branch will shutter its doors to the public on May 25. Santander Securities (SAN) is Banco Santander’s investment division. The move is part of the investment wing’s plan to move to a service-only model rather than its model that involves offering investment advice and soliciting sales. A scaled down staff will stay on at the branch after it closes.

Santander Securities in Puerto Rico has come under close scrutiny over the last five years. It is one of the investment firms that came under fire beginning in 2013 when Puerto Rico bonds and bond funds saw a steep drop in value and tens of thousands of investors sustained huge investment losses. Many of these investors should never have even purchased such volatile securities, which were always too risky for their portfolios and not in line with their investment goals. Yet Santander Securities brokers, as well as brokers from UBS Puerto Rico (UBS-PR), Banco Popular, and other investment firms, pushed them on clients, often in very high concentrations.

According to Bloomberg, between late 2012 and 2013, Santander Securities marketed and sold more than $280 million in Puerto Rico closed-end funds and municipal bonds, even as it shed its own holdings of these same securities. In 2015, the investment bank resolved allegations brought by the Financial Industry Regulatory Authority (FINRA) accusing the firm of deficiencies involving its structured product business, including its handling of reverse-convertible securities sales to retail customers in Puerto Rico.

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The US Securities and Exchange Commission has announced another whistleblower award, this one for over $2.2M. The whistleblower, an ex-insider of a company, had initially reported the information resulting in a successful SEC enforcement action to another federal agency before going to the SEC.

Under the Exchange Act Rule 21F-4(b)(7), the SEC will treat information that a whistleblower has given to another agency first as if it were submitted to the regulator at the same time, as long as the information is provided to the Commission within 120 days. When initially, the whistleblower voluntarily gave the information to the other federal agency, the latter “referred the matter” to the SEC, which conducted a probe. The whistleblower then gave the SEC the same information that was shared with the other agency.

SEC Office Whistleblower Chief Jane Norberg noted how this latest award is a prime example of how when even if a whistleblower provides the information to another agency first, he/she may still be eligible for an SEC whistleblower award as long as that same information is shared with the Commission within the safe harbor period and satisfies the other requirements for qualifying for the award. To date, the regulator has awarded 54 whistleblowers over $264M.

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In a Commodity Futures Trading Commission case, a judge has ordered former church Pastor Wesley Allen Brown, Edwards Rubin, and their Maverick International Inc. to pay approximately $8.6M combined in civil penalties and restitution. The defendants are accused of commodity pool fraud, commodity futures fraud, and federal commodity law violations.

A summary judgment order was also issued against Brown, who is serving time in prison for securities fraud and other offenses. Rubin is his brother-in-law and the president of Maverick.

According to the CFTC’s Complaint, issued in 2015, the defendants took part in a scam to solicit money for a supposed commodity pool trading futures contracts and precious metals. Brown is accused of abusing his position as pastor to influence church members to invest. Many of his targets were older investors/churchgoers. The regulator claims that the defendants misappropriated over $2M by soliciting the public for commodity futures contract trading.

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Barclays Capital Inc. (BARC) and a number of its affiliates will pay $2B to settle the United States government’s civil case alleging fraud involving the underwriting and issuance of residential mortgage-backed securities. The settlement comes after a three-year probe. The case is US v. Barclays Capital Inc.

The US accused Barclays of taking part in a fraud to sell three dozen residential mortgage-backed securities deals, causing investors to suffer billions of losses. More than $31B of Alt-A and subprime mortgage loans were securitized and over half of these went on to default. The RMBSs were sold leading up to the 2007 financial crisis.

The bank and its affiliates allegedly misled investors about the quality of the loans backing the RMBS deals, including purposely misrepresenting key features of the loans that involved. The British bank, meantime, maintains that it did not mislead investors about the quality of the loans. The government, however, contends that Barclays committed wire fraud, mail fraud, bank fraud, and violated the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.

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Man Accused of Targeting Religious Congregation Members Admits to $13M Fraud
Sung “Laurence” Hong has pleaded guilty to money laundering and wire fraud, as well as to pretending to be an investment adviser so he could bilk clients of almost $13M. His plea agreement states that Hong mostly targeted members of religious organizations.

This is not the first time Hong that was caught for investor fraud. He served three years in prison after defrauding a neighbor of about $800K. Now, he may end up back in jail for decades.

SEC Files Case Against Man Accused in $250K Ponzi Scam
The US Securities and Exchange Commission has filed charges against Niket Shah, who is accused of stealing over $250K from coworkers and friends in a Ponzi scam. The regulator’s case comes in the wake of complaints brought by investors.

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The US Securities and Exchange Commission has filed civil charges against Wedbush Securities Inc. The regulator is accusing the brokerage firm of not supervising registered representative Timary Delorme, 59, and disregarding warning signs that she was involved in a pump-and-dump fraud that targeted retail investors. Delorme has settled the SEC’s charges against her.

According to the SEC, Delorme took part in certain trades to manipulate the stocks. She received benefits, which were paid to her spouse, for getting customers to invest in microcap stocks that were part of a pump-and-dump fraud run by Izak Zirk Engelbrecht, who also has been subject to civil, as well as criminal charges. Engelbrecht, previously called Izak Zirk de Maison before adopting his wife’s last name, is accused of running the scam that involved microcap company Gepco Ltd.

Also, Delorme and her husband are accused of selling shares for Engelbrecht and sending him the money for the sales while she was paid a commission. This purportedly allowed Engelbrecht to hide the sales.

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