Articles Posted in Securities Fraud

Stock Promoters Accused in Pump-and-Dump Scam
The US Securities and Exchange Commission has filed fraud charges against James M. Farinella, his Integrated Capital Partners Inc., Anthony Amado, and his Equity Awareness Group with fraud over the alleged inflation and manipulation of a microcap company’s share price. As a result of the alleged pump-and-dump scam, the fraud made over $1M.

According to the regulator, Farinella and his consulting firm controlled almost the whole public float of stock in Pazoo Inc. Farinella paid Amado’s company to promote the microcap issuer and take part in matched trading to make it appear as if there was market activity for the stock. Amado and one of his employees, Carlo Palomino, are accused of enacting the scam, which allowed Farinella to make over $1M when dumping the Pazoo shares.

New Jersey prosecutors have filed criminal charges against Farinella over the microcap fraud allegations.

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Stephen J. Hatch, the mastermind of a $70M Arizona Ponzi scam, has been sentenced to five years in prison. Hatch, who pleaded guilty to fraud, targeted Christian investors, causing many of them to lose their life savings.

As part of his plea deal, the Texas man agreed to pay back $1M to investors. Meantime, prosecutors agreed to not file criminal charges against Hatch’s children.

Many of his victims were family members and friends. Hatch persuaded 110 investors to back various real estate properties by promising double digit returns on land deals.

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In Kokesh v. SEC, the US Supreme Court has restricted the US Securities and Exchange Commission’s ability to pursue disgorgement after five years have passed since the fraud alleged led to illegal profits. In a unanimous decision, the nation’s highest court said that that the five-year statute of limitations must be followed.

The securities fraud lawsuit was brought by Charles Kokesh, who was convicted for misappropriating funds from four investment companies that he controlled and using the money to support his expensive lifestyle. In 2015, a judge ordered Kokesh to pay a $2.4M civil penalty.

Additionally, because the SEC considered disgorgement to have no statute of limitations, the judge also ordered the businessman to pay $35M. This is how much he was calculated to have illegally made starting from when he began engaging in his illegal conduct, from 1995 to 2009.
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SEC Charges Man Accused of Running $10M Ponzi Scam
Mark Anderson Jones, whom the US Securities and Exchange Commission has charged with fraud, has been sentenced to 70 months in prison in a parallel criminal case. Jones pleaded guilty to running a $10M Ponzi scam.

According to the SEC, Jones solicited investors in a number of US states, as well as in Washington DC. He did this by issuing promissory notes, as well as providing personal guarantees to clients that were willing to invest in The Bridge Fund, which supposedly lent money to Jamaican businesses that were waiting to get commercial bank loans.

However, rather than investing their money the way he said he would, Jones used a portion of investors’ cash to pay his own expenses as well as make Ponzi payments.

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Over the weekend, Yasuna Murakami, a Cambridge-Massachusetts based hedge fund manager, was arrested and charged with wire fraud. Murakami, who managed MC2 Capital Management LLC, is accused of misappropriating investors’ funds in a Ponzi-like scam. The arrest and criminal charges come a few months after the state’s regulator, Secretary of the Commonwealth William Galvin, filed his own administrative case against Murakami for the fraud.

Prosecutors are accusing the hedge fund manager of seeking to bilk investors. The MC2 Capital Canadian Opportunities Fund was supposed to grant American investors exposure to a Donville Kent Asset Management-supervised fund. Instead, Murakami allegedly misused investors’ money to pay for his bills, including purchases at expensive department stores, as well as to make his own investments in the fund.

He is accused of using investors’ money to pay other investors in two other MC2 hedge funds and allegedly misappropriating money from those funds. Under the charging statute, If convicted, Murakami could face up to 20 years in prison, supervised release, a fine, and be ordered to pay up to two times the gross loss or gain.

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In federal court in Sherman, TX, the US Securities and Exchange Commission has filed an emergency action to halt a $22.7M mortgage investment scam involving Thurman P. Bryant, III and his Bryant United Capital Funding, Inc. According to the regulator’s complaint, Bryant and his firm raised about $22.7M from about 100 investors by making false promises, including telling them that the investments were free of risk and guaranteed 30% minimum yearly returns.

The SEC claims that Bryant told investors that his firm would fund the mortgages, which would be sold right away to third parties for a fixed fee. He allegedly informed them that their money would be left in secure escrow account as evidence of funds in order to obtain a credit line to cover the mortgage loans. Bryant and his firm are accused of violating the Securities act of 1933’s Section 17(a) and the Securities Exchange Act of 1934’s Section 10(b) and Rule 10b-5 thereunder.

According to the Commission, since the start of this year alone, Bryant has raised about $1.4M from investors. So far, Bryant’s firm has paid about $16.8M as supposed investment return and also as referral fees to investors who’ve helped identify additional prospective investors.

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Financial Firm and Its CEO Settle Life Settlement Fraud Charges
The US Securities and Exchange Commission announced that Verto Capital Management and its CEO William Schantz III have settled civil charges accusing them of running a Ponzi-like scam involving life settlements. As part of the settlement, Verto Capital and Schantz will pay over $4M.

According to the regulator’s complaint, the two of them raised about $12.5M through promissory note sales that were supposed to pay for the firm’s purchase and sale of life settlements. The notes were sold mostly through insurance brokers in Texas.

Investors who were religious were the main target of the alleged fraud.They were allegedly told that that the securities were short-term investments that were at low risk of defaulting.

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Former UBS Broker is Barred form the Securities Industry

Ronald Broadstone, an ex-UBS (UBS) broker, has agreed to be barred from the securities industry. The Financial Industry Regulatory Authority is the one that brought the ban, accusing him of misusing and misappropriating customer monies, settling a customer case without telling his firm, and taking part in unauthorized trading.

According to the self-regulatory organization, Broadstone’s attorney testified that the former broker would not respond to more questions. His refusal to speak violated FINRA rule 8210.

The Financial Industry Regulatory Authority has put out a disciplinary complaint against Walter Marino. The former broker worked for Legend Equities Corp. in Palm Beach Gardens, Florida at the time he allegedly facilitated variable annuities sales that were unsuitable for two of his older clients. According to the regulator, Marino recommended exchanges of non-qualified VAs to the customers without having reasonable grounds to guide them toward these investments.

FINRA said that Marino earned about $60K in commissions. Meantime, the customers lost over $82K because of surrender charges they were forced to pay and they did not benefit financially. Not only that but because Marino didn’t apply the tax-free exchange provision of the Internal Revenue Code, the customers ended up with substantial tax liabilities.

Now, the regulator wants Marino to disgorge his ill-gotten gains and pay the customers full restitution for the variable annuity fraud.

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The US Securities and Exchange Commission is charging Matthew Fox and his Wayne Energy LLC with securities fraud. The regulator brought its Texas securities case in federal district court in the city of Sherman.

According to the Commission’s complaint, Fox raised about $950K for a joint venture that was supposedly involved in reworking and recompleting an oil and gas well. However, contends the SEC, Fox raised the funds by recycling offering documents from another oil and gas company that he previously ran (that company failed) rather than customizing the paperwork to this new venture and its specific risks.

Prior to setting up Wayne Energy in 2015, Fox had run Frisco Exploratory Company and it is the latter’s offering documents that he used. The Commission claims that the offering documents made a false statement, which was that Wayne Energy would not commingle its own money with the joint venture’s funds. The documents also falsely stated that the oil and gas company was licensed as an operator with the Texas Railroad Commission.

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