Securities Industry Commentator by Bill Singer Esq

March 8, 2018

Manhattan Man Arrested For Attempting To Hire Hitman To Murder Three Intended Victims (DOJ Press Release)
For starters, this case caught my attention because of its somewhat idiotic headline. I mean like someone is going to hire a hitman to murder three "un" intended victims? Perhaps there's a discount if you let the hitman pick any three victims rather than making him go through the effort of killing three folks of your choice. Beyond my initial grammatical concerns, I found the allegations in this case fascinating. Joel Rosquette a/k/a "Rick" was arrested and charged with  three counts of murder-for-hire. As set forth in part in the DOJ Press Release:

ROSQUETTE hired an individual he thought was a hitman to murder two of his neighbors in Manhattan.  Because ROSQUETTE was short on cash, he arranged for the hitman to murder another person first - the owner of a gas station in Staten Island - and rob the gas station's safe.  ROSQUETTE's plan was to have the proceeds of the gas station robbery pay for the murder of his two neighbors.  What ROSQUETTE did not know was that the person he thought was a hitman was actually an undercover FBI agent.  This morning, ROSQUETTE was arrested and his plan to commission three murders was foiled

CCO Fined and Suspended For Amending Her Own U5 ( Blog)
Let's assume that a FINRA member firm fires its Chief Compliance Officer at 3 p.m. on February 8, 2018. So . . . who files that CCO's Form U5? Is the last act that a CCO should undertake is to file her own U5 and notify CRD that she is no longer registered with the member firm? Before you're too quick to answer, assume that the discharge was based upon the firm's inability to continue to pay the CCO's salary but otherwise it's all good and everyone is still friendly. Now assume that the firing is hostile and the CCO was told to get out of here immediately. Finally, simply assume that no one is particularly angry about the termination but there is no one on premises other than the COO with the registration necessary to prepare and submit the CCO's U5. Yeah, I know, that's quite a fact pattern to work through. In any event, consider today's featured FINRA AWC analysis by our publisher Bill Singer, Esq. and see what you think about the bit of self-help engaged in by a terminated CCO.

Three Plead Guilty to $29 Million Bank Fraud Scheme (DOJ Press Release)

From January 2011 through March 2016, Eddie Contreraz was the owner and operator of Preferred Marketing Group, Inc. ("PMG"), which assisted clients with credit repair and obtaining funding from lenders  During the relevant period, at least 95% of PMG's clients obtained funding while using false and fictitious documents Contreraz produced, among which were inflated false income figures; false representations that the loan applicant's position was the manager of a company; false and fraudulent corroborating pay stubs, W- 2 tax documents, and/or utility bills. Contreraz caused six, co-defendant employees to assist borrowers to fraudulently obtain at least 2,300 loans, credit lines, and/or credit cards from at least ten FDIC insured banks and at least another 140 loans, credit lines, and/or credit cards from three non-FDIC insured consumer lenders totaling at least $29,000,000. Contreraz pled guilty to one count of bank fraud. Co-defendants Stephanie Loraine Contreraz and Abraham Valdez, each pleaded guilty to one count of conspiracy to commit bank fraud.  

Statement on Potentially Unlawful Online Platforms for Trading Digital Assets (SEC Divisions of Enforcement and Trading and Markets)
As set forth in part in the SEC Statement:

Online trading platforms have become a popular way investors can buy and sell digital assets, including coins and tokens offered and sold in so-called Initial Coin Offerings ("ICOs").  The platforms often claim to give investors the ability to quickly buy and sell digital assets.  Many of these platforms bring buyers and sellers together in one place and offer investors access to automated systems that display priced orders, execute trades, and provide transaction data.

A number of these platforms provide a mechanism for trading assets that meet the definition of a "security" under the federal securities laws.  If a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration.  The federal regulatory framework governing registered national securities exchanges and exempt markets is designed to protect investors and prevent against fraudulent and manipulative trading practices.

. . .

The SEC staff has concerns that many online trading platforms appear to investors as SEC-registered and regulated marketplaces when they are not.  Many platforms refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange.  Although some of these platforms claim to use strict standards to pick only high-quality digital assets to trade, the SEC does not review these standards or the digital assets that the platforms select, and the so-called standards should not be equated to the listing standards of national securities exchanges.  Likewise, the SEC does not review the trading protocols used by these platforms, which determine how orders interact and execute, and access to a platform's trading services may not be the same for all users.  Again, investors should not assume the trading protocols meet the standards of an SEC-registered national securities exchange.  Lastly, many of these platforms give the impression that they perform exchange-like functions by offering order books with updated bid and ask pricing and data about executions on the system, but there is no reason to believe that such information has the same integrity as that provided by national securities exchanges.