Securities Industry Commentator by Bill Singer Esq

March 6, 2018

Promoter in Securities Kickback Scheme Barred from Penny Stock Offerings (SEC Litigation Release 24063)
In Securities and Exchange Commission v. Edward Henderson (Complaint, 11-CV-12116, United States District Court for the District of Massachusetts), the SEC alleged that Edward Henderson had engaged in a kick-back scheme with others to trigger investments in various thinly-traded stocks. Unbeknownst to Henderson, he was dealing with an undercover FBI agent, who agreed that Henderson would receive a fee for introducing the representative to executives willing to pay kickbacks in exchange for funding. The Court's final judgement permanently prohibits Henderson from violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, holds him liable for $12,650 in disgorgemen but deems it satisfied by a forfeiture order entered against Henderson in a related criminal action. The judgment also prohibits Henderson from participating in penny stock offerings.

SEC Charges Unregistered Broker for Illegally Brokering Sales of EB-5 Securities (SEC Press Release 2018-30)
The SEC alleged that between April 2014 and March 2017, Edwin Shaw LLC solicited foreign nationals to invest in a taxi and limousine company's securities pursuant to the EB-5 Immigrant Investor Program, which provides a residency pathway for foreign investors.The SEC alleged that Edwin Shaw LLC received a fee ranging from $5,000 to $50,000 from over 30 foreigners investors, and, thereafter, misused about $400,000 of the investor fees on its own expenses and personal expenses of the firm's principal. Without admitting or denying the allegations in the order, Edwin Shaw agreed to a cease-and-desist order and agreed to pay disgorgement of $400,000 plus prejudgment interest of $54,209.20 and a penalty of $90,535.READ the FULL TEXT SEC ORDER

In The Year 2525 If FINRA Arbitration Is Still Alive ( Blog)
In the year 2525, if man is still alive, if woman can survive, they may find that a Claimant in a 2018 FINRA arbitration had requested a postponement. In the year 3535, ain't gonna need to tell the truth, tell no lies. everything you think, do, and say. is in the pill you took today, and FINRA will find a way to notify arbitrators about a postponement request within one day. For options traders, there is the wisdom of Black & Scholes. For Wall Street regulators, there is the wisdom of Dodd & Frank. For those of us involved with FINRA arbitration, we have the wisdom of Zager & Evans.

CFTC Charges Iowa Resident Lon Olen Friedrichsen with Solicitation Fraud in Violation of the Commodity Exchange Act / CFTC also Charges Friedrichsen with Acting as an Unregistered Commodity Trading Advisor (CFTC Press Release pr7701-118)

In a Complaint filed in the United States District Court for the Southern District of New York ("SDNY"), the CFTC alleged that from at least December 16, 2014 through May 24, 2017, Lon Olen Friedrichsen fraudulently solicited clients via Craigslist ads, telephone, and e-mail. Freiderichsen allegedly fraudulently induced clients to provide him with access to their personal commodity futures accounts held at Futures Commission Merchants; and, thereafter, purportedly traded commodity futures in those accounts and advised clients to conceal his involvement. Friedrichsen allegedly demanded 50% of any profits but abandoned his clients after he lost money trading their accounts. The Complaint asserts that at least twelve clients lost at least $160,382 versus Freiderichsen's retention of some $45,369 in fees.READ the FULL TEXT Complaint

In anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Financial Fiduciaries, LLC and Thomas Batterman submitted an Offer of Settlement, which the federal regulator accepted. In the Matter of Financial Fiduciaries, LLC and Thomas Batterman , Respondents (Order Instituting Cease-And-Desist Proceedings, Making Findings, And Imposing A Cease-And-Desist Order; Invest. Adv. Act Rel. No. 4863; Admin. Proc. File No. 3-18385 / March 5, 2018) (the "Order"). In accordance with the terms of the settlement, the SEC ordered that Respondents  cease and desist from any violations of the Advisers Act. Respondent Financial Fiduciaries shall pay a $40,000 civil money penalty, and Respondent Batterman shall pay a $20,000 civil money penalty READ the FULL TEXT SEC Order. As set forth in the "Summary" portion of the Order:

These proceedings arise out of Respondent Financial Fiduciaries' nondisclosure of financial conflicts of interest and violations of the "Custody Rule" of the Advisers Act. From early 2012 to mid-2015, Financial Fiduciaries, an investment advisory firm registered with the Commission, failed to disclose to certain of its clients financial conflicts of interest created by Financial Fiduciaries' arrangement with a third party trust company. Because of these arrangements and the fact that an employee of Financial Fiduciaries' parent company handled funds of Financial Fiduciaries' clients, from early 2012 to mid-2014, Financial Fiduciaries had custody over some of its clients' assets while failing to implement sufficient controls designed to protect those client assets from loss or misappropriation, as required by the Advisers Act. Respondent Thomas Batterman, as a principal of the firm, caused the violations by Financial Fiduciaries

Brazilian National Pleads Guilty to ATM Skimming / Defendant withdrew $43,000 from ATMs throughout Metro Boston (DOJ Press Release) Helisson Benazi de Souza pled in the United States District Court for the District of Massachusetts to  one count of using counterfeit access devices (debit cards); one count of possessing 15 or more counterfeit access devices (debit cards); three counts of possessing device-making equipment (ATM skimming devices); one count of illegal transactions with an access device (other persons' debit cards); and two counts of aggravated identity theft. As set forth in part in the DOJ Press Release, Souza was part of an:

ATM skimming operation in which he stole the debit card information and personal identification numbers (PIN) of legitimate bank account holders when they used their debit cards at ATMs. Skimming devices made to look like legitimate card access slots were used to record the account information on the magnetic stripes of the debit cards, while secret pinhole cameras recorded the cardholders entering their PINs on the keypads. The stolen account information was then saved on blank plastic cards, including gift cards and hotel key cards, making "clones" of the legitimate debit cards. Benazi de Souza used such cloned cards, and the corresponding PINs, to withdraw $43,000 from ATMs in the Metro Boston area in May 2017.