Articles Posted in Texas Securities Fraud

In a second superseding indictment to an ongoing Texas securities fraud probe, the US Attorney’s Office for the Southern District of Texas has brought criminal charges again against several people accused in an alleged multimillion dollar pump-and-dump scam. This latest indictment expands on the original criminal charges, which involved Chimera Energy Corp. stock and an alleged $6M scam.

With this latest indictment, investors of 12 stocks were allegedly defrauded of more than $25M. Prosecutors said that the scam bilked investors in different companies through the use of fraudulent trading practices, the publication of misleading and false information via ads and press releases, and the circumvention of Securities and Exchange Commission reporting requirements.

Those charged in this latest Texas securities indictment include Andrew Ian Farmer, Charles Earl Grob, Carolyn Price Austin and Eddie Douglas Austin of Houston, John David Brotherton of League City, and Scott Russel Sieck of Florida for the parts they played in the alleged conspiracy fraud involving a dozen stocks, including Chimera Energy Corp. stock. The latter was the stock involved in the initial criminal indictment that brought charges against both Farmer and Thomas Galen Massey, also a Houston resident.

Jay Bruce Heimburger, a Dallas man, has pleaded guilty to mail fraud over his involvement in a $6.4M investment scam that allegedly took place from about March 2011 to November 2013. He faces up to more than 20 years in prison, has to pay a $250K fine, and could be ordered to pay restitution.

Heimburger is the second man to plead guilty in the investment scam, which defrauded investors of $6.4M. In plea documents, Heimburger admitted to seeking to bilk investors while using false pretenses and promises, as well as by making misrepresentations.

Another man, Houston resident Christopher Arnold Jiongo, pleaded guilty earlier this year to wire fraud related to the scam. Both men will be sentenced later this year. A third Texan, Craig Allen Otteson from McKinney, is scheduled to plead guilty on July 18.

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Lawrence Allan DeShetler is facing up to 20 years in prison for Texas investment adviser fraud. The Houston-based financial adviser pleaded guilty to mail fraud last month.

DeShetler fraudulently obtained $1.9M from clients he worked for through DeShetler & Company Inc. Three years ago, he started recommending that they take out money from their investments and give the cash to him so that he could help them garner higher returns. Instead of investing these funds, he put the money in a bank account that was only under his authority.

DeShetler admitted to using one investor’s funds to begin building a house in Nicaragua and persuading a senior investor, who was a widow in her eighties, to liquidate a trust account and move nearly $190K to him. Last year, DeShetler stayed at her house while she visited family. When she came back, he was no longer there and neither were her investment documents.

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Nearly a year after suing his former financial adviser for allegedly misappropriating $15M from him, Dallas Cowboys running back Darren McFadden is now suing Ameriprise Financial (AMP) over his investment losses. In his Texas securities fraud case, McFadden claims that the firm was negligent in supervising Michael Vick. The broker is not the same person as former NFL football player Michael Vick nor is he related to him.

Ameriprise started investigating Vick in 2010 because of suspect and unauthorized trades identified in McFadden’s account. However, contends the NFL player, he was never told of the probe or their concerns or that Vick was suspended months later.

McFadden claims that Ameriprise had multiple opportunities to stop the misappropriation of his funds yet took no such action. McFadden later followed Vick to another firm where the ex-financial adviser allegedly misappropriated even more money from him.

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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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Two investment promoters are accused of running an advance fee scheme from what they claimed was a Dallas-based investment advisory firm. According to an Emergency Cease and Desist Order entered by the Texas Securities Commission, the Mark Diaz and Raymond Hill offered to buy investors’ stock under the condition that those selling would have to cover transaction costs. The two men promoted their alleged Texas-based securities fraud through social media, bogus websites, forged documents, and supposed IRS affiliations.

Two websites they set up had names similar to Cain Capital LLC, which is a firm that is actually registered with the SEC. According to the Texas regulator, one of the bogus websites directs visitors to a regulator filing that the real Cain Capital submitted to the SEC, as well as to that firm’s Twitter and Facebook pages.

Both sites and the social media accounts are not connected to Cain Capital in anyway. The two men are accused of sending unsolicited email that included documents with Cain Capital’s name in the letterhead to 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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Grand Jury Indicts Texas Woman in $1M Ponzi Scam
A federal grand jury has indicted Nemelee Liwanag Jiao on two wire fraud counts for allegedly running a Texas Ponzi scam that cost investors over $1M. At least 35 investors were bilked.

According to the indictment, Jiao, a Texas resident, had investors back promissory notes that were supposedly issued by two non-profit schools in the Philippines when, in reality, she was using their money on herself. Jiao told investors she represented both Lord of Peace Learning Center and Shepherd’s Light Learning Center and she got them to invest their money in the promissory notes after promising 10-100% in returns. She also promised that they would get back their principle plus interest within 30-days to a year of investing.

The indictment against Jiao stated that she will have to forfeit all proceeds if convicted. She faces up to 20 years in prison for wire fraud, as well as a $250K fine.

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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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Business partners Janniece Kaelin and Robert Allen Helms have pleaded guilty to bilking investors of up to $20M in a Texas-based Ponzi scam. The oil and gas financiers used the funds raised for energy ventures to cover their own expenses from 1/2010 to 12/2013.

The US Securities and Exchange Commission filed a securities fraud lawsuit against Kaelin, Helms, and their companies Iron Rock Royalty Partners LP and Vendetta Royalty Partners LTD in 2013. According to the regulato, they misled investors about their professional experience, meantime raising almost $18M that were supposed to go toward royalty interests in oil and gas.

Included among the alleged purchases they made: using investors’ money to pay for a 3 1/2-week trip around the world and paying for the more than $247K wedding of Kaelin’s daughter in Hawaii.

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