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Investment Adviser Accused of Scamming Pro Athletes and Church Members Admits to Securities Fraud
Richard Wyatt Davis Jr., a North Carolina-based investment adviser,has pleaded guilty to tax evasion and securities fraud charges. Davis was indicted for securities fraud, wire fraud, and tax evasion in 2017. He initially pleaded not guilty.

According to the criminal indictment, Davis used investor funds to repay other investors in Ponzi-like fashion, as well as to pay for vacation homes, a personal chef, and other lavish expenses. Investors were solicited at events attended for people who distrusted the banking system and the stock market.

Documents contend that Davis made misrepresentations to more than six dozen investors, costing them about $12.8M as a result. Among his victims were people he knew from church, as well as professional athletes. Of the money that Davis solicited, he paid back investors about $3.5M.

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The SEC has filed fraud charge against Behavioral Recognition Systems, Inc. and its former CEO Ray C. Davis. According to the Commission, the Houston-based technology company, and Davis solicited over $28M from hundreds of investors, diverting over $7.8M to the latter’s personal use.

Between 1/2013 and 7/2015, investors targeted in the alleged Texas securities scam were solicited for funds and their involvement in seven equity securities offerings. “Material misrepresentations and misleading statements” were allegedly made to them about: how investor proceeds would be used, executive compensation, operating costs, and related party transactions.

The regulator’s complaint, claims that Behavioral Recognition Systems and Davis lied more than once in order to get investors to give them their money. Offering documents claimed that investor money would go toward “working capital,” “growth, “mezzanine funding,” and “general corporate purposes” for Behavioral Recognition Systems. Instead, contends the SEC, Davis used shell companies under his control to divert about $11M of investor money for his own use–$7.8M of that money was allegedly diverted during the period at issue. Bogus invoices from the shell companies for services purportedly rendered were then generated to conceal the fraud.
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The Financial Industry Regulatory Authority is warning investors interested in buying shares in companies touting potentially high returns related to cryptocurrency-related activities, but that are unable to “back up such claims,” to be on the lookout for potential financial fraud.

The self-regulatory organization provided a number of “tips” for avoiding a stock scam involving cryptocurrencies, including:
• Conduct your own research before making any investments.
• Watch out for “unrealistic predictions” or claims of results even if they are published online or issued via press release.
• Be wary of “aggressive” cold caller-sourced solicitations, especially if the stocks being recommended are “very low-priced.”
• Be careful of anyone promising guaranteed or specific returns.
• Consider “pushy sales pitches” or pressure to “act now” mandates to be red flags.
• Check FINRA’s BrokerCheck to see if the representative or firm is registered or to find out of they have been sanctioned for any alleged violations in the past.
• Look at the Securities and Exchange Commission’s Edgar database to see if the company that is selling the stock has submitted filings with the regulator. That said, registration of a security with the SEC is no guarantee that the investment is a good one.
• Watch out for stocks that see big price jumps because fraud or stock rigging may be involved.

Already, the US Securities and Exchange Commission has suspended trading in different securities over uncertainties regarding the accuracy of activities related to cryptocurrencies. Just this week, the regulator temporarily halted trading in shares of The Crypto Co. after its stock price increased by over 2,700 this month amidst concerns about “potentially manipulative transactions” and the “accuracy and adequacy of information” provided to investors and regulators.

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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 filed civil charges against two brokers for allegedly making unsuitable trades that made them money while costing investors. According to the regulator’s complaint, Zachary Berkey and Daniel Fischer engaged in in-and-out trading—a strategy that was “almost certain” to cause customers losses.

As a result, contends the SEC, 10 Four Points Capital Partners LLC customers collectively lost almost $574K while Fischer earned $175K in commissions and Berkey earned $106K. Four Points is a Texas LLC headquartered in NYC.

The Commission accused the two brokers of churning customer accounts while hiding material information from clients, including facts about commissions, fees, and other costs. Because the securities were only held for a brief time and the costs for these transactions were “significant,” the investments’ share prices would have had to go up substantially for even a “minimal profit” to be made.

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Two years after the Financial Industry Regulatory Authority (FINRA) barred former UBS Financial Services of Puerto Rico (UBS-PR) broker Jose Ramirez, nicknamed the Whopper, our UBS Puerto Rico fraud attorneys are continuing to provide representation to investors who sustained losses because they took his and other UBS-PR brokers’ advice to borrow from credit lines in order to invest in even more securities. If you are one of these investors and you would like to explore your legal options, please contact Shepherd Smith Edwards and Kantas, LTD LLP today.

It was in 2015 that the US Securities and Exchange Commission (SEC) brought charges against Ramirez accusing him of fraud in the offer and sale of $50 million of UBS-PR affiliated, non-exchange traded closed-end mutual funds. The former UBS broker allegedly enriched himself by advising certain customers to use non-purpose credit lines that a firm affiliate, UBS Bank USA, was offering so that they could buy even more shares.

These customers were not, in fact, allowed to use credit lines to buy the securities and Ramirez allegedly knew this. He is accused of getting around restrictions by telling customers to move money to a bank that had no affiliation with UBS and then re-depositing the funds to their UBS Puerto Rico brokerage account in order to buy additional closed-end mutual funds or Puerto Rico bonds. Such a scheme was a violation of numerous rules and regulations and, if misrepresented to the investors as the SEC has alleged, would have been a major legal violation.

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According to prosecutors, criminal charges have been brought against 14 people over their alleged involvement in a $14.7M investment scam that primarily targeted older investors. The US Attorney’s office alleges that between 1/2014 and 1/2017 the defendants and others sought to defraud the investors and prospective investors of certain companies by attempting to artificially manipulate the volume and price when shares were traded.

The group allegedly hid that they were behind the rigging of these companies’ shares through a pump-and-dump boiler room scam. They are accused of manipulating share trading pattens while aggressively soliciting senior citizens by phone to try and persuade them to buy the shares.

When their targets showed a willingness to buy the stock being solicited to them, the boiler room employees would allegedly pressure them to buy, sometime even charging them subscriptions so that they could receive future stock recommendations. Investors were not notified that the employees and others they conspired with had sold their own shares in these companies.
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Former Stifel, Nicolaus Broker is Accused of Variable Annuity Violations
The Financial Industry Regulatory Authority has suspended an ex-Stifel, Nicolaus (SF) broker for four months over variable annuity transactions that he purportedly inappropriately recommended to certain investors. At the time of the alleged variable annuity fraud, James Keith Cox worked with Sterne, Agee & Leach. Stifel Financial later acquired that firm.

According to the regulator, Cox recommended a number of VA transactions even though there was no reasonable grounds for thinking they were appropriate for the investors. In addition to the suspension, Cox will disgorge the $25,460 he was paid in commissions.

FINRA Bars California Man From Industry Over $100M in Undisclosed EB-5 Investment Sales
A FINRA hearing panels has barred a California-based registered representative for taking part in private securities transactions involving $100M in EB-5 Investments that he failed to disclose to his employer financial firm. Jim Seol sold the EB-5 investments through his business Western Regional Center Incorporated.

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A district court judge has sentenced Navin Shankar Subramaniam Xavier, formerly the CEO of Essex Holdings Inc., to 15 years behind bars because of his involvement in two fraud scams. Xavier pleaded guilty to two wire fraud counts in January.

He ran Essex Holdings from 9/2010 through 5/2014, raising over $30M from almost 100 investors who bought promissory notes that were supposedly for investments in shipping, sugar transportation, and iron ore mining in Latin America. Xavier used forged paperwork, including a bogus financial statement. He promised return rates to get prospective customers to participate. He used most of the funds for his and his wife’s expenses, including luxury cars and jewelry, cosmetic surgery, and wedding bills. He also used newer investors’ funds to pay earlier investors until the Ponzi scam failed. According to evidence brought to court, investors lost more than $29M.

In a separate fraud, Xavier used the company to secure $1.2M in payments and about $1.5M of commercial real estate from the South Carolina Coordinating Council for Economic Development (SCCCED). These were supposed to go toward developing an industrial property into a rice packaging facility and a diaper plant. Documents submitted in court indicate that the defendant gave the SCCCED fake financial documentation so the contract would go to him. He also provided other fake financial paperwork, including bogus contractor invoices, so he would get paid. He again used a chunk of the funds for his own living expenses.

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Shepherd Smith Edwards and Kantas, LLP (“SSEK”) is pleased to announce that a Financial Industry Regulatory Authority (“FINRA”) arbitration panel has awarded an SSEK client a net of almost $9 million for his losses in Puerto Rico bonds and Puerto Rico Bond Funds. SSEK client, Dr. Luiz Romero Lopez, won his securities arbitration claim against UBS Puerto Rico with the FINRA panel awarding him a net of almost $8 million in compensatory damages and an additional $1 million in punitive damages.

According to the FINRA arbitration panel, UBS exhibited “extreme recklessness and indifference” to the consequences of abuses in its “non-purpose” loan program in Puerto Rico. The panel accused UBS of either purposely using a “non-purpose” loan to be “recycled” in a manner that violates Regulation U or doing so with “reckless” indifference to the consequences that could arise from such abusive loans.

The FINRA arbitration panel found that the loan created “additional excessive leverage.” Because of this, when the market dropped in 2013, the Claimant lost more money than if his funds had been more suitably invested with “less leverage.”

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