(SEC Litigation Release No. 24034) In Securities and Exchange Commission v. Robert L. Sonfield, Jason Landess, et al. (United States District Court for the Southern District of Texas, 08-CV-2351) final judgment was entered against attorney Jason Landess and Robert Sonfeld for their role in unregistered securities offerings. Without admitting or denying the allegations in the SEC's Complaint, Landess and Sonfeld consented to the entry of a final judgment imposing a $25,000 and $6,500 penalty, respectively. A default judgment was entered against Roger Brewer and Marc Lane, holding them jointly and severally liable for $2,761,953.01 in disgorgement and $3,643,648.17 in prejudgment interest plus a $100,000 penalty against each. Brewer and Lane were enjoined from participating in the offering of penny stocks. READ the FULL TEXT SEC Complaint
Statement by SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo: Regulators are Looking at Cryptocurrency (Public Statements by SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo) SEC and CFTC Chairs published an Op-Ed in the "Wall Street Journal" in which they discussed Distributed Ledger Technology ("DLT") as the "next great driver of economic efficiency." READ the FULL TEXT WSJ Op-Ed.
SEC Charges Transfer Agent and Its Principal with Fraud for Misappropriating Client Funds (SEC Litigation Release No. 24033) In Securities and Exchange Commission v. Quicksilver Stock Transfer and Alan Shinderman (United States District Court for the District of Nevada; 18-CV-00131) the SEC alleged that Quicksilver Stock Transfer, LLC and its President and sole owner, Alan Shinderman misappropriated approximately $630,000 of client funds. READ FULL TEXT SEC Complaint. The SEC alleged in part that, in August 2013, Quicksilver received wire transfers totaling $1.45 million for the benefit of China Energy Corporation but that Shinderman diverted about $630,000 for his and Quicksilver's own benefit.
FINRA Fines Firm Over Research Reports Practices (BrokeAndBroker.com Blog) Today's BrokeAndBroker.com Blog presents a concise regulatory settlement from FINRA about research reports violations. Research reports? Yeah, you're right, we haven't seen a lot in recent years about research violations. The Europeans have been rolling out some new disclosure rules about research via their Markets in Financial Instruments Directive or MiFID, but that's them and not us. Seems only yesterday that the newspapers were filled with headlines about the horrors of bought-and-sold research and front-running. These days -- what's a newspaper? On the other hand, maybe Wall Street's regulators don't have enough to do and are looking for a new target of opportunity and, go figure, what's old is new and research practices may be under scrutiny again.
Individual Who Compromised Over 1,000 Email Accounts At A New York City University Sentenced To 6 Months In Prison (DOJ Press Release 18-025) On August 9, 2017, Jonathan Powell pled guilty and was subsequently sentenced to six months in prison and two years of supervised release and ordered to pay $278,855 in restitution for computer fraud in connection with his scheme to obtain unauthorized access to more than 1,000 email accounts maintained by a New York City-area university in order to download sexually explicit photos and videos. Also, Powell admitted to compromising email accounts at several other educational institutions located in Pennsylvania, Arizona, Florida, Ohio, and Texas.
Founder And CEO Of Wright Time Capital Group Sentenced To 21 Months In Prison For Commodities Fraud (DOJ Press Release 18-026) On October 13, 2017, Geoffrey S. Berman pled guilty to commodities fraud in connection with his operation of Wright Time Capital Group . Wright misrepresented the historical trading performance of WTCG, and misappropriated a large amount of investor funds, most of which were lost in forex trading. Wright was sentenced to 21 months in prison and three years of supervised release and ordered to pay $358,000 in restitution.
(Texas State Securities Board Press Release ) The TSSB entered an Emergency Cease and Desist against R2B Coin, a Hong Kong-based company selling investments tied to a cryptocurrency called r2b coin, promising investors that the digital currency will soon be one of the world's most valuable. R2B Coin allegedly represents to potential investors that the distributor of the coin, Williams Corp. Ltd., is a licensed global firm and licensed securities dealer based in Hong Kong and Dubai; however, TSSB contends that Williams Corp. has never been registered to sell securities in Texas. Despite various optimistic projections by the company, TSSB alleges that as recently as Jan. 18 the company told investors of what it calls "growing pains" and has referenced its attempts to fix problems with security for customer accounts and parts of the application investors use to invest. READ the FULL TEXT Emergency Order.
Abuse And Harassment On Wall Street (BrokeAndBroker.com Blog) BrokeAndBroker.com Blog publisher Bill Singer, Esq. is troubled by a recent FINRA regulatory settlement. The facts of the matter are cringe-worthy. Frankly, it all adds up to some moron stockbroker posting an online sexual solicitation in what seems to be a misguided effort to retaliate against another stockbroker. It's the stuff that should get someone sued. It may even be the stuff that should prompt an employer to fire you. Beyond the civil lawsuit and the firing, is this also a subject for Wall Street regulation replete with fines, suspensions, or bars? Bill's not saying he has the answers. Bill is saying that he has some provocative questions.
CFTC Charges Randall Crater, Mark Gillespie, and My Big Coin Pay, Inc. with Fraud and Misappropriation in Ongoing Virtual Currency Scam / Defendants allegedly solicited more than $6 million for investments in a virtual currency known as "My Big Coin" (CFTC Press Release pr 7678-18) The CFTC filed a Complaint in the United States District Court for Massachusetts charging Defendants Randall Crater, Mark Gillespie, and My Big Coin Pay, Inc., with misappropriating over $6 million from customers by, among other things, transferring customer funds into personal bank accounts, and using those funds for personal expenses and the purchase of luxury goods. READ FULL TEXT CFTC DMass Complaint. READ FULL TEXT DMass Order
(Order Instituting Adminstrative and Cease-And-Desist Proceedings, Making Findings, Imposing Sanctions, and Cease-And-Desist Order; '33 Act Rel. No. 10454; Invest. Adv. Act. Rel. No. 4848; Admin. Proc. File No. 3-18349 / January 23, 2018), proceedings concern disclosure violations by AmericaFirst Capital Management, LLC ("AFCM") and its two principals, Rick Gonsalves and Robert Clark, while selling promissory notes to individual retail investors. While soliciting investors to purchase or renew $2.7 million in AFCM's promissory notes, Clark - who was directed by AFCM's CEO Gonsalves - gave the impression to investors that AFCM was a profitable business and failed to disclose that there was a risk of default associated with the promissory notes. In reality, the firm for several years had experienced increasingly negative net worth and decreasing net income, and had been sustaining its business operations through cash raised from the promissory notes sold to investors. In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Respondents submitted an Offer of Settlement, which the federal regulator accepted. Respondents were ordered to Cease-And-Desist from violating the Securities and the Advisers Act. Respondent AFCM was Censured and ordered to pay a $50,000 civil money penalty. Respondents Gonsalves and Clark were each ordered to pay a $25,000 civil money penalty. READ FULL TEXT SEC OIP
Stockbroker Expunges 7 Year Old UBS Customer Suitability Complaint (BrokeAndBroker.com Blog) Six years after a customer complained about allegedly unsuitable trades, a registered representative files a FINRA expungement arbitration challenging the posting of the customer's allegations on his industry record. Given the time that has passed, that's going to be quite a challenge. One FINRA arbitrator handled this case and provides us with a thoughtful rationale for recommending expungement. It's an interesting seven-year journey from customer complaint to a FINRA Arbitration Decision, and an intriguing exercise in how the pros and cons of such a case are weighed.
(SEC Litigation Release 24029) Defendant Daniel H. Glick pled guilty to one count of wire fraud under in United States v. Daniel Glick (United States District Court for the Northern District of Illinois, No. 17-CR-739. Also see, the FULL TEXT SEC Gllick Complaint. From at least 2011 through at least 2017, Glick engaged in a fraudulent scheme by which he misappropriated at least $5.2 million dollars from clients (largely elderly), provided financial institutions with forged checks and other documents, and lied to clients about the use, status, and safety of their invested funds.
SEC Charges State-Registered Investment Adviser, CEO, and Former COO with Offering Fraud (SEC Litigation Release No. 24031)In Securities and Exchange Commission v. Hoplon Financial Group et al. (C.D. Cal., 18-CV-00047, January 12, 2018), the SEC charged that Hoplon Financial Group and its CEO, Daniel B. Vazquez, Sr., created the New Economic Opportunities Fund I, LLC vehicle to purchase and flip residential real estate properties, and that the defendants allegedly raised $2.18 million from 27 investors, primarily from investors' individual retirement account funds, based on misrepresentations about how much compensation they would take. Former Hoplon Financial Group COO Gilbert Fluetsch is charged with violations of Section 17(a) of the Securities Act, and with aiding and abetting Hoplon and Vazquez's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. READ the FULL TEXT Complaint.
Six Accountants Charged with Using Leaked Confidential PCAOB Data in Quest to Improve Inspection Results for KPMG (SEC Press Release 2018-6) The Securities and Exchange Commission charged six certified public accountants among which were former staffers at the Public Company Accounting Oversight Board (PCAOB) and former senior officials at KPMG LLP, with making unauthorized disclosures of PCAOB plans for inspections of KPMG audits from 2015 through February 2017, thus allowing the former KPMG partners to analyze and revise audit workpapers in an effort to avoid negative findings by the PCAOB. The U.S. Attorney's Office for the Southern District of New York announced criminal charges against the six accountants in a parallel action. READ FULL TEXT SEC ORDERS. READ SEC Chair Clayton's "Statement on Charges Against Former KPMG and PCAOB Personnel / Jay Clayton"
FINRA Arbitrators See No UBS, Citigroup, Or Merrill Customers And Dismiss Case (BrokeAndBroker.com Blog) Some public customers approach a FINRA arbitration against their former brokerage firm and stockbroker as if it's a fairly informal event -- not like going to court and maybe you could even show up in shorts and flip-flops. Other public customers come to FINRA arbitration deadly serious. They ain't takin' no prisoners. They ain't playin' no games. They enter the hearing room with a wheelbarrow filled with documents and intent to answer the bell for the 13th round of a 12 round fight. In today's featured FINRA arbitration we got the deadly-serious version of unhappy Claimants. The Claimants filed a Statement of Claim that is breath-taking in terms of its breadth and depth of charges. As combatants, the Claimants seemed ready to go toe-to-toe in furtherance of their claims. They sort of entered the ring and met in the middle of the mat where the ref told them not to hit below the belt and when to go to a neutral corner. And, okay, maybe the contestants even grudgingly banged gloves as a token of respect. Unfortunately, the Claimants never got to that point in the match where the bell rings for the first round. To the surprise of all in attendance, the judges refused to allow the contest to go forward and disqualified the Claimants.
(DOJ Press Release) "The Jersey Shore" television personality Michael "The Situation" Sorrentino pleaded guilty respectively to one count of tax evasion and his brother Marc Sorrentino pleaded guilty to one count of aiding in the preparation of a fraudulent tax return. Michael Sorrentino faces a maximum of five years in prison; and Marc Sorrentino faces three years. Their accountant Gregg Mark pleaded guilty in 2015 to conspiring to defraud the United States with respect to their tax liabilities.
(DOJ Press Release) After their conviction following a three-week jury trial in the United States District Court for the Southern District of New York, Christopher Cervino a/k/a "Smitty" was sentenced to one year and one day in prison, and Sheik F. Khan a/k/a "Abida Khan" was sentenced to 53 months in prison for their roles in a securities fraud scheme involving the shares of a publicly traded company called VGTel, Inc. ("VGTL"). Additionally, both Defendants were sentenced to three-years-supervised-release, and Cervino ordered to forfeit $35,000, and Kahn ordered to forfeit $290,787.
FINRA Sanctions Charitable Remainder Trust Pitch (BrokeAndBroker.com Blog) In today's BrokeAndBroker.com Blog, our publisher Bill Singer, Esq. analyzes an excellent FINRA AWC involving the promotion of a charitable remainder trust by a registered rep. Bill applauds FINRA's well-written settlement and finds the self-regulator's rationale compelling. On top of that, the imposed fine and suspension seem balanced and fair. The regulator did a superb job in presenting its case. The Respondent's lawyer did a superb job in negotiating a reasonable package of sanctions. Unfortunately, there's a voluntary Corrective Action Statement appended to the published AWC and as BrokeAndBroker.com Blog readers know, Bill doesn't like these after-thoughts -- not one bit.
CFTC Charges Colorado Resident Dillon Michael Dean and His Company, The Entrepreneurs Headquarters Limited, with Engaging in a Bitcoin and Binary Options Fraud Scheme (CFTC Press Release pr7674-18) CFTC filed a civil enforcement action in the United States District Court for the Eastern District of New York against Defendants Dillon Michael Dean and his company The Entrepreneurs Headquarters Limited, a UK-registered company. The CFTC Complaint charges the Defendants with engaging in a fraudulent Bitcoin scheme that misrepresented that customers' funds would be pooled and invested in products including binary options. CFTC alleges that Defendants made Ponzi-style payments to commodity pool participants from other participants' funds. Allegedly, after misappropriating over $1 million, Defendants stopped making payments to their customers and Dean has purportedly launched another similar trading venture under the name Real Trade Profits, using a website to solicit customers to deposit Bitcoin for a pooled investment in binary options trading and promising high rates of return.
CFTC Charges Patrick K. McDonnell and His Company CabbageTech, Corp. d/b/a Coin Drop Markets with Engaging in Fraudulent Virtual Currency Scheme (CFTC Press Release pr7675-18) CFTC filed a federal civil enforcement action in the United States District Court for the Eastern District of New York against Defendants Patrick K. McDonnell and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM) charging them with fraud and misappropriation in connection with purchases and trading of Bitcoin and Litecoin. The CFTC Complaint asserts that although Defendants represented that they would provide real-time virtual currency trading advice and for virtual currency purchasing and trading on behalf of the customers under McDonnell's direction, in fact, those representations were false snd the customers' funds were misappropriated. CFTC alleges taht in an effort conceal their scheme, soon after obtaining customer funds, Defendants removed their website and social media materials from the Internet and ceased communicating with CDM Customers, who lost most if not all of their invested funds.