Articles Posted in Securities Fraud

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.

Businessman Settles SEC Case Over Immigrant Visa-Related Investor Scam
Ariel Quiros, a businessman accused of defrauding foreign investors seeking to earn US residency through the EB-5 Immigrant Investor Program, has agreed to the settle the Securities and Exchange Commission’s case against him. As part of the settlement, which a court still has to approve, Quiros will be held liable for over $81M in disgorgement of ill-gotten gains and a $1M penalty. He also has to forfeit about $417K.

Over 700 investors from at least 75 nations invested with Quiros. Their funds were supposed to go toward “construction projects at the Jay Peak Resort and a proposed (nearby) biomedical research facility,” said the SEC. Instead, contends the regulator, Quiros misused over $50M to buy another ski resort and pay for his own spending, including the purchase of two luxury condos. He also failed to direct about $30M to the construction projects, which was necessary for these investors to become US residents.

Now, Quiros must give up the two condos and the resort that he bought using investors’ funds, as well as surrender his ownership stake in Jay Peak and many other properties.

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In the criminal case brought against them, two ex-Morgan Stanley (MS) investment advisers, James S. Polese and Cornelius Peterson, have pleaded guilty to the criminal charges against them. Polese was charged with conspiracy, aggravated identity theft, investment adviser fraud, and multiple counts of bank fraud. Peterson is charged with conspiracy, investment adviser fraud, and bank fraud.

In a parallel civil case, the US Securities and Exchange Commission claims that beginning in 2014, the two men defrauded three clients of almost half a million dollars. The allegations include:

*Stealing almost $450K from one client and using the funds to make their own investments and pay for Polese’s credit card bills and the college tuition of his children.
*Using a client’s assets to obtain loan financing for an entity in which they were investors.
*Investing client monies in a venture in which they both had a financial stake without telling the client.
*Getting a loan with unfavorable terms for a client.
*Charging one client advisory fees that were 50% more than what he told her they would be.

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Two Fast Food Restaurant Workers are Accused of Impersonating SEC Employees
Frank Gregory Cedeno and Leonel Alexis Valerio Santana, two employees at a Florida restaurant, are accused of pretending to be SEC employees who tried to get at least 95 investors to give pay them $1.3M. The men are charged with wire fraud and conspiracy.

According to the criminal complaint, Cedeno and Santana targeted investors of binary options, in particular those that bought them from Banc de Binary and other entities that had been the subject of lawsuits brought by US regulators. For example,in 2016, Banc de Binary settled with the SEC and the CFTC for $11M allegations that they illegally solicited US investors via its trading platform. But even as early as the year before that, prosecutors contend, Banc de Binary securities buyers began receiving calls and emails from supposed SEC employees wanting money related to these investments. Investor targets were purportedly told that they would have to pay money to get part of the Banc de Binary settlement. More than two dozen people reportedly gave the scammers over $235,000 collectively.

Chicago Investment Adviser Arrives at Plea Agreement in Senior Fraud Case
Daniel Glick, a former investment advisor, has pleaded guilty to wire fraud. Per the plea deal, Glick bilked clients of at least $5.2M and lied to them about their money. The majority of his victims were older investors, including his in-laws and a nursing home resident.

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The US Commodity Futures Trading Commission has filed civil cases against virtual currency operators CabbageTech, Entrepreneurs Headquarters Ltd., and My Big Coin Pay Inc. The regulator is alleging fraud, misappropriation, misrepresentation, and other allegations. Its wants disgorgement, fines, restitution, injunctions, and other remedies.

In the case against CabbageTech, doing business as Coin Drop Markets, and its owner Patrick K. McDonnell, the Defendants are accused of participating in a virtual currency scam to solicit investor for funds and virtual money, supposedly in exchange for real time trading advice and the sale and trading of virtual currency under McDonnell’s guidance. Instead, claims the CFTC, investors received no such advice and they never saw their money again because McDonnell and CabbageTech misappropriated their funds. The regulator believes that the defendants sought to hide their scam by eliminating their online and social media presencse and ending communications with customers.

The CFTC’s civil action against McDonnell and his company was announced the same day as its case against The Entrepreneurs Headquarters Limited, which is a company registered in the UK, and founder Dillon Michael Dean. The regulator believes that beginning in April 2017 through now, the defendants solicited at least $1.1M of Bitcoin from over 600 investors, with the promise that the Bitcoin would be turned into fiat currency and invested in a pooled investment vehicle to trade commodity interests.
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The US Securities and Exchange Commission has ordered the suspension trading in UBI Blockchain Internet Ltd.(UBIA) stock. The company’s stock rose over 900% last year in the wake of the popularity of digital currencies.

Now, the SEC has temporarily halted the sale and purchase of UBI BLockChain stock because of market activity that it describes as “unusual and unexplained” since at least November of last year involving the company’s Class A common stock.

It also has questions regarding the accuracy of claims that the company made in financial statements. Addressing the SEC’s move, UBI Blockchain CEO Tony Liu contended that his company, which touts blockchain technology, is not the same as bitcoin companies.

UBI Blockchain, which is based in Hong Kong, claims that it wants to utilize the decentralized-ledge technology of blockchain so that consumers can track the “original source” of a drug or food product. Two weeks ago, in a 3-to-1 trading split, the company’s market value hit over $1B. It’s current market value is more than $800M.

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The SEC has filed a case accusing broker Brian Hirsch of illegally receiving over $1M in secret kickbacks in return for giving some customers favored access to “lucrative” initial public offerings. The regulators said that these customers made money because of the special treatment. Meantime, prosecutors in New Jersey have filed a parallel criminal case against Hirsch.

According to the SEC, Hirsch, who worked at two broker-dealers, disregarded policies and procedures and made “long-running” deals with specific customers, granted them bigger allocations of some of the public offerings that the firms were marketing. Advisor Hub reports that these two brokerage firms were Barclays Capital (BARC) and Stifel (SF).

As part of the deal, contends the regulator, a customer named Joseph Spera and another customer paid Hirsch cash kickbacks that were equivalent to a percentage of the trading profits they made for the offering stock allocated to them. Hirsch is accused of giving the two customers “preferential access to hundreds of IPOS and secondary public offerings.” These customers purportedly would usually sell their stock quickly so that they could make a “substantial profit.” This was at the expense of the firms’ other customers and the interests of issuers in raising funds from long-term investors.

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Two Investment Advisers Accused of $20M Investor Scam
The US Securities and Exchange Commission has filed civil charges against investment advisors Ronald A. Fossum and Alonzo Cahoon. They are accused defrauding retail investors in an unregistered securities scam. According to the regulator, from about 3/2011 to 6/2016, Fossum raised over $20M from more than 100 investors via securities offerings in investment funds under his control or ownership, including the:

  • Accelerated Asset Group, LLC
  • Turnkey Investment Fund, LLC
  • Smart Money Secured Income Fund, LLC

Fossum is accused of misappropriated hundreds of thousands of dollars of investors’ money to pay his own expenses, including living in a home owned by one of the fund’s free of rent. He also allegedly used investor funds to pay for international travel and federal taxes.

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The US Securities and Exchange Commission has filed financial fraud charges against the Woodbridge Group of Companies, LLC and its owner Robert H. Shapiro. The Woodbridge Group is comprised of unregistered investment companies. According to the regulator, Woodbridge and Shapiro ran a $1.2B Ponzi Scam that bilked over 8,400 investors, many of whom where older investors. At least 2,600 investors collectively spent close to $400M that came from their IRAs.

The civil fraud charges include other alleged federal securities law violations. The SEC also announced an asset freeze to keep more investor funds from dissipating. The regulator wants restoration of allegedly ill-gotten gains plus interest, as well as financial penalties.

Senior Financial Fraud
The Commission’s complaint accused Woodbridge and its owner of defrauding seniors using a “sham” business model that involved selling investments in unregistered Woodbridge funds. The company presented its main business as giving loans to third-party commercial property owners that were paying 11-15% in yearly interest for “’hard money’ short-term financing.” In fact, claims the SEC, the property owners were not third-parties but were companies belonging to Shapiro. Not only that but they had no income streams and never paid interest on these supposed loans. Woodbridge and Shapiro are said to have used investor money to buy nearly 200 commercial and residential properties in California and Colorado.

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The US Securities and Exchange Commission has placed a temporary halt on trading in The Crypto Company (CRCQ) stock until January 3, 2018. The company’s stock has just seen a 2,700 percent rise in price. It recently agreed to purchase a German cryptocurrency data platform called Coin Tracking E. K.

Citing concerns regarding “accuracy and adequacy,” the SEC expressed concerns about the quality of information that was given to investors. The regulator also is looking into whether “potentially manipulative transactions” involving the stock took place last month.

The Crypto Co. provides digital assets, consulting services, and technologies to the “blockchain and cryptocurrency markets.” It doesn’t sell cryptocurrencies or other digital-type monies. The Crypto Co.’s stock price, at $3.50 a share in late September, rose to $575 earlier this week. As a result, The Crypto Co.’s stock value is now over $11B—that’s more than the market worth of some of the most renowned companies in the US, including Macy’s.

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