Articles Posted in Securities Fraud

In a subpoena enforcement action, the US Securities and Exchange Commission is ordering 235 LLCs in Colorado and Delaware to provide documents related to its probe into whether Woodbridge Group of Companies, LLC, a California-based real estate and investment company owned and run by its president Robert Shapiro, engaged in a $1B financial fraud. All of the entities, plus another LLC, are affiliated with Woodbridge. The regulator had subpoenaed the 236 of them for the documents in August. Only one LLC responded by the deadline.

Now, the Commission wants a federal district court to make the rest of the LLCs comply with the subpoenas. Meantime, Shapiro has invoked his Fifth Amendment right. However, he maintains that his company did not commit fraud.

SEC Has Been Probing Woodbridge Since 2016
For the past year, the regulator has been looking into looking into possible securities fraud by Woodbridge and others involving more than $1B that was provided by thousands of investors throughout the US. The alleged fraud may include unregistered securities sales, including securities sales by brokers who were not registered, and other fraud.

Continue reading

According to The Wall Street Journal, Franklin Resources Inc. (BEN), has sold hundreds of millions of dollars of Puerto Rico bonds in the wake of the devastation of Hurricane Maria. This includes Franklin Mutual Advisers LLC’s decision to sell its $294 million stake in the U.S. territory’s general obligation bonds.

Franklin, also known as Franklin Templeton, is the second largest holder of Puerto Rico bonds among mutual funds. OppenheimerFunds (OPY) is the largest.

The Wall Street Journal said that Franklin is not the only one trying to get rid of its Puerto Rico bonds. According to sources, a “swath of mutual funds and hedge funds” have finally given up on the island’s securities, too. For example, Merced Capital and Varde Funds sold their $172 million in Puerto Rico municipal bonds to other bondholders.

Continue reading

Secretary of the Commonwealth of Massachusetts William Galvin has filed civil fraud charges against Moser Capital Management and investment adviser Nicklaus J. Moser. Galvin’s office is accusing Moser and his firm of fraud involving two venture capital funds: the Moser Capital Fund, LLC and the Moser Capital Fund II, LLC.

The state regulator claims that the respondents engaged in fraudulent conduct and breached their fiduciary duties. The breaches alleged include making misrepresentations and omissions to investors and prospective investors by providing misleading information, not getting “valid investor signatures” when receiving more capital contributions, and charging a performance fee to the non-qualified account of an advisory client.

According to Galvin’s office, Moser set up the funds to raise cash for start-up companies. The investment adviser was allegedly a sales representative at a company that sold products to startup ventures, but he did not tell investors that he had financial reasons for making sure that the start-ups in operation.

Continue reading

The financial fallout caused by Hurricanes Irma and Maria is being felt not just on the island of Puerto Rico, but in the U.S. mainland as well. Puerto Rico bonds, which were already in trouble prior to the storms because of the island’s faltering economy and bankruptcy, are expected to take even more of a hit. Moody’s Investors Service assesses the future of the bonds, which were already at a Caa3 rating, as negative. The ratings agency said that the “disruption of commerce” caused by hurricanes will drain Puerto Rico’s “already weak economy” further. All of this is expected to impact not just the Puerto Rico bonds but also the mutual funds based on the U.S. mainland that hold them, which means that investors will be impacted.

According to InvestmentNews, Morningstar stated that 15 municipal bond funds, “14 of them from Oppenheimer Funds (OPY),” have at least 10 % of their portfolios in the island’s bonds. The 15th fund is from Mainstay. Morningstar reported that through September 28, the funds lost a 1.57% average for the month. The Oppenheimer Rochester Maryland Municipal Bond (ORMDX), which has 26% of its portfolio in Puerto Rico bonds, was considered the worst performer. In addition to Oppenheimer and Mainstay, other U.S.-based funds that are losing money from Puerto Rico bonds, include, as reported by The New York Times:

· Paulson & Co., which has invested billions of dollars in Puerto Rico securities. The Wall Street firm is run by hedge fund manager John A. Paulson.

The US Securities and Exchange Commission has filed charges against investment adviser Tarek D. Bahgat for allegedly stealing $378K from clients. Bahgat is accused of misappropriating funds from seven investment advisory clients, most of whom were elderly investors.

According to the regulator, from December 2014 through September 2016, Bahgat, using the alias Terry Dean Bahgat, misappropriated the clients’ funds online and transferred the money to his own account and that of WealthCFO, which was the payroll and accounting company that he controlled. FINRA’s BrokerCheck database shows that Bahgat was working for two brokerage firms: Cambridge Investment Research and Gradient Securities. After exiting Gradient, he was a state-registered advisor and used the name WealthCFO Partners.

The SEC’s complaint claims that Bahgat would sometimes obtain the internet bill-paying privileges in some client accounts by pretending to be the client or having his assistant, Lauramarie Colangelo, pose as the client during phone calls with the brokerage firms that held the accounts. Colangelo was the operations manager of WealthCFO.

Continue reading

The US Securities and Exchange Commission has filed civil charges against Michael Scronic, a New York-based investment adviser accused of defrauding retail investors in a $19M Ponzi scam. According to the regulator, beginning in 2010, Scronic raised funds from 42 friends and acquaintances for a “risky options trading strategy” involving the Scronic Macro Fund, a fictitious hedge fund in which he was supposedly selling shares. Many of the investors he approached were from the community where he lives. Their investments ranged from $23K to $2.4M.

The SEC contends that Scronic lied to them about his investing track record, claiming he had a long history of proven returns while touting that the investments he was selling were liquid and easily redeemable. In reality, claims the Commission, the investors’ money was draining away because of massive trading losses.

Scronic is accused of not segregating the funds according to investor and transferring their money into his personal brokerage account. His investment agreements with investors stipulated that their funds would be placed in a hedge fund, in which he would serve as acting investment adviser, and he would send them quarterly reports. Scronic also noted in these agreements that he had a fiduciary obligation to investors and would comply with all state and federal laws.

Continue reading

ServiceMesh Co-Founder Accused of Fraud
The US Securities and Exchange Commission has filed charges against Eric Pulier, the co-founder of ServiceMesh (SMI) and a former IT executive at Computer Sciences Corporation (CSC). According to the regulator, Pulier bilked CSC of $98M related to its acquisition of SMI.

The SEC contends that Pulier bribed an ex-Commonwealth Bank of Australia VP and another ex-bank executive so that Commonwealth would go into contracts with CSC that would allow SMI to get a $98M earn-out payment from the former as part of the acquisition. This meant that the contracts had to satisfy a $20M revenue threshold prior to a specific date.

Meantime, claims the SEC, Pulier was the recipient of more than $30M of that $98M because he was a majority SMI shareholder. He allegedly used a nonprofit to funnel more than $2.5M to the two ex-Commonwealth Bank of Australia as kickbacks.

Continue reading

Former LPL Broker Indicted for $850K Securities Fraud and Theft
Sonya Camarco, an ex-LPL (LPLA) financial broker, has been indicted in Colorado on seven counts of theft and six counts of securities fraud. She is accused of taking over $850K in client funds for her own use between 1/2013 and 5/2017.

Camarco was fired by LPL last month. Her BrokerCheck record on the FINRA database indicate that she was let go for depositing third-party checks for clients into an account she controlled. Camarco is accused of failing to disclose to clients, including one elderly investor who had dementia, that she was depositing the funds in this manner. If this is true then not only is this a matter of financial fraud but also this would be a case of senior financial fraud.

Securities Fraud Involving Earth Energy Exploration Bilks Investors of $3M
In Indiana, fifteen people were convicted and ordered to prison in a securities fraud case involving Earth Energy Exploration Inc. Investors in Texas and other states lost $3M.

Continue reading

State Street Resolves SEC Fraud Charges for $35M
To settle charges brought by the US Securities and Exchange Commission, State Street (STT) will pay over $35M to resolve charges accusing the financial firm of overcharging transition management customers in secret, purportedly making $20M in improper revenue in the process, and leaving out material information related to GovEx, the trading platform it uses for US Treasury securities. The charges against State Street were brought in two separate orders.

In the first SEC order, the firm is accused of using false trading statements, post-trade reports, and pre-trade estimates so it could misrepresent the compensation it received on different transactions. After one customer noticed certain concealed markups, State Street’s employees claimed that these were “inadvertent commissions.”

In the second order, the SEC said that the firm did not notify GovEx subscribers that although the trading platform had been touted as “fair and transparent,” one subscriber was given a “Last Look” option that briefly allowed for the opportunity to turn down matches to quotes that were submitted. The Last Look trading functionality was used by that subscriber to turn down 57 matches, each face valued at $1M. Counterparties were not notified by State Street that Last Look had rejected their orders.

Continue reading

SEC Charges SunTrust With Collecting Over $1.1M in Excess Mutual Fund Fees

The US Securities and Exchange Commission has filed charges accusing SunTrust Investment Services of collecting over $1.1M in unwarranted fees from mutual fund clients. The SunTrust Banks subsidiary will pay an over $1.1M penalty to resolve the regulator’s civil charges.

According to the regulator’s order, SunTrust Investment Services improperly recommended costlier mutual fund share classes to clients when less expensive shares of these funds were available. The SEC says this was a breach of the investment services firm’s fiduciary duty to take actions in the client’s best interests.

Contact Information