(DOJ Press Release) In the United States v. Barclays Capital Inc.(Amended Complaint, United States District Court for the Eastern District of New York,16-CV-7057, May 11, 2017) the Department of Justice alleged that Barclays caused billions of dollars in losses to investors through fraudulent sales of 36 residential mortgage-backed securities ("RMBS") in which over $31 billion worth of subprime and Alt-A mortgage loans were securitized and more than half of which defaulted. DOJ alleged that Barclays misled investors about the quality of the mortgage loans backing those deals. READ the FULL TEXT Amended Complaint -and -Agreement for Compromise Settlement and Release
Arizona-Based Peer-To-Peer Bitcoin Trader Convicted of Money Laundering (DOJ Press Release) Thomas Mario Costanzo, a.k.a. Morpheus Titania, was found guilty of five counts of money laundering by a federal jury. When undercover federal agents approached Costanzo and told him that they were drug dealers, Costanzo provided them with bitcoin and told them it was a great way to limit their exposure to law enforcement. Also, Costanzo used bitcoin to purchase drugs from others and that he provided bitcoin to individuals who were buying drugs via the internet.
Wells Fargo Whistleblower Yesenia Guitron Wins James Madison Freedom Of Information Award (BrokeAndBroker.com Blog) Yesenia Guitron worked at Wells Fargo's St. Helena, California Branch from 2008 to 2010. She refused to open fake bank accounts. She complained about what she felt were fraudulent practices. Wells Fargo fired her. Although Guitron filed federal whistleblower claims against Wells Fargo, the federal courts dismissed her claims based upon findings that Wells Fargo had presented clear and convincing evidence that Guitron could have otherwise been terminated for failing to meet sales goals, insubordination, and refusing to return to work after being placed on administrative leave. Essentially, the courts believed that notwithstanding her allegations of employer misconduct, Wells Fargo had demonstrated that they had other legitimate grounds on which to have otherwise fired the employee. Notwithstanding. Otherwise. Sometimes ya gotta love how blind (or blinded) Justice can be. Sadly, there are times when she's stumbling around in the dark.
Federal grand jury indicts Shreveport financial planner, Houston pastor for defrauding investors out of more than $1 million (DOJ Press Release) A federal grand jury returned a 13-count indictment charging financial planner Gregory Alan Smith and church pastor Kirbyjon H. Caldwell with one count of conspiracy to commit wire fraud, six counts of wire fraud, one count of conspiracy to commit money laundering and three counts of money laundering. Additionally, Smith and Caldwell are charged in two separate counts of money laundering. Victims were defrauded into purchasing over $1 million to invest in Chinese bonds issued by the former Republic of China prior to losing power to the communist government in 1949. They are not recognized by China's current government and have no investment value
(Order Regarding Notice of Deposition and Document Subpoena Directed to Respondent, Admin. Proc. Rul. Rel No. 5663; Admin. Proc. File. No. 3-18127 / March 28, 2018) Martin Shkreli was recently sentenced to 84 months in federal prison and is currently an inmate. The SEC Division of Enforcement asked Administrative Law Judge ("ALJ") Grimes to grant permission to depose Respondent Shkreli and issue a subpoena for five categories of documents. Shkreli opposes the deposition request, indicating through his counsel that he will invoke his Fifth Amendment privilege as to all questions. In part, he opposes the document request. The Division states that in the event Shkreli invokes his privilege against self-incrimination, it will seek an adverse inference. Shkreli concedes unavailability but asserts, through his counsel, that he will invoke his privilege against self-incrimination. Although ALJ Grimes affirms that a blanket invocation of the Fifth Amendment is usually prohibited, he admonishes that the law does not require the ritual performance of a useless act.
Former Wells Fargo bank teller and whistleblower Yesenia Guitron wins the 2018 James Madison Freedom of Information Award sponsored by the Northern California Chapter of Society of Professional Journalists (Video Interview). Yesenia Guitron worked at Wells Fargo's St. Helena, California Branch from 2008 to 2010, and after she refused to open fake bank accounts and complained about what she felt were fraudulent practices, she terminated by the bank. Her federal whistleblower claims were dismissed because the courts found that Wells Fargo had presented clear and convincing evidence that Guitron could have otherwise been terminated for failing to meet sales goals, insubordination, and refusing to return to work after being placed on administrative leave. http://brokeandbroker.com/PDF/Guitron9Cir. Notwithstanding the federal courts' decisions, allegations have since arisen that the Occupational Safety and Health Administration ("OSHA") failed to properly investigate Guitron's allegations of wrongful retaliation. Similarly, Wells Fargo has been subjected to serious regulatory sanctions as a result of many of the revelations prompted by Guitron and others. Recently, the Society of Professional Journalists awarded to Guitron a James Madison Freedom Of Information Award. There aren't all that many heroes walking around today. In the opinion of Bill Singer, Esq., publisher of the BrokeAndBroker.com Blog and the Securities Industry Commentator, Guitron is one. Take a moment to watch her video. Take a moment to understand the horrific uphill battle face by industry whistleblowers. Take a moment to recognize the incompetence and corruption that has polluted Wall Street, its regulatory system, and our political system.
Broker-Dealer Admits It Failed to File SARs (SEC Press Release 2018-50) Broker-dealer Aegis Capital Corporation admitted that it failed to file Suspicious Activity Reports (SARs) on numerous suspicious transactions. As part of its investigation, the SEC settled with Aegis Capital Corporation, its former AML Compliance Officer McKenna, and its former Chief Executive Officer Eide. The SEC is proceding to a hearing concerning its allegations against former Aegis AML Compliance Officer Terracciano. READ the FULL TEXT SEC Orders against Aegis Capital; McKenna and Eide; and Terracciano.
(OTCMG Press Release) https://www.prnewswire.com/news-releases/otc-markets-group-launches-new-stock-promotion-flag-300620465.html OTCMG released a new stock promotion flag that identifies securities that are the subject of current promotional activity."Anonymous, paid stock promotion should have no place in the public markets," said R. Cromwell Coulson, President and Chief Executive Officer, OTC Markets Group. "We are taking responsibility to provide transparency to investors and encourage public companies to disclose and correct misinformation that can harm the efficient market pricing process. We continue to work with regulators to advocate for the modernization of promotion regulations, including requiring additional disclosure around paid stock promotion and identifying the people associated with these campaigns."
FINRA Arbitration Panel Divines Intent Of Deceased In Dividing Account Assets (BrokeAndBroker.com Blog) In today's BrokeAndBroker.com Blog we are confronted with yet another variation on the theme of how folks attempt to provide for their loved ones after death but how life, regulation, compliance, and law may frustrate such intentions. Given the often incomprehensible state of estate law and some profound misunderstanding about how the mechanics of joint, tenants in common, and transfer-on-death brokerage accounts work, public customers often think that their after-death desires are going to be accomplished through resort to a 'of estate-planning and trust documents and maneuvers. Sometimes it all works out. Sometimes it's a mess. One of the rewarding things about the BrokeAndBroker Blog's coverage of near-disasters and disasters is that we call attention to issues that folks haven't given enough thought to and frequently get thanked for the warning.
SEC Obtains Summary Judgment in EDGAR Manipulation Case (SEC Litigation Release No. 24086) The United States District Court for the Southern District of New York granted the SEC's motion for summary judgment against Nauman Aly, a trader in Pakistan , who allegedly made $425,000 manipulating the price of Integrated Device Technology securities by filing a false tender offer on the SEC's EDGAR system. READ the FULL TEXT Memorandum Opinion and Order
Manhattan U.S. Attorney Announces Lawsuit Against Foreclosure Law Firm For Systematically Overbilling Fannie Mae For Foreclosure Expenses (DOJ Press Release) Following the initiation of the matter by a Relator pursuant to the Qui Tam tam provisions of the False Claims Act, the United States filed a Complaint-in-Intervention in the United States District Court for the Southern District of New York ("SDNY") against foreclosure law firm Rosicki, Rosicki & Associates, P.C. and its wholly owned affiliates, Enterprise Process Service, Inc. and Paramount Land, Inc. for allegedly engaging in a scheme to generate false and inflated bills for foreclosure-related expenses and causing those expenses to be submitted to and paid for by the Federal National Mortgage Association, known colloquially as Fannie Mae. READ the FULL TEXT Complaint-In-Intervention
(SEC Press Release 2018-49) The SEC instituted administrative proceedings against Wedbush Securities, Inc. In the Matter of Wedbush Securities, Inc., Respondents (Order Instituting Administrative Proceedings; '34 Act Rel. No. 82954; Admin. Proc. File No. 3-18411 / March 27, 2018) (the "Wedbush OIP") The Wedbush OIP alleges that the broker-dealer failed reasonably to supervise Timary Delorme, who was allegedly involved in a purportedly long running microcap stocks pump-and-dump scheme. Also, in anticipation of the institution of proceedings by the SEC but without admitting or denying the findings, Timary Delorme submitted an Offer of Settlement, which the federal regulator accepted. In the Matter of Timary Delorme, Respondents (Order Instituting Administrative And Cease-And-Desist Proceedings, Making Findings, And Imposing Remedial Sanctions And A Cease-And-Desist Order; '34 Act Rel. No. 82953; Admin. Proc. File No. 3-18410 / March 27, 2018) (the "Delorme OIP"). The Delorme OIP found that Delorme violated the antifraud provisions of the federal securities laws. Delorme agreed to pay a $50,000 penalty, accept the imposition of industry and penny stock bars, and to cease and desist from future violations. BILL SINGER's COMMENT: I would note my objection to the SEC Press Release's characterization of Wedbush as "Recidivist." I am not defending Wedbush but I am objecting to the SEC's characterization at a time when the federal regulator is merely alleging misconduct and the Respondent is entitled to the presumption of innocence. It is disgraceful that the federal regulator would tag Wedbush as a recidivist in a press release announcing the filing of charges yet such approbation in never attached to repeat offenders among any of Wall Street's major firms, all of which have pled to or been found to have committed serious violations of rules, regulations, and laws. Worse, the sanctimonious SEC not only fails to label Wall Street's major firms as recidivists but the same federal regulator routinely grant those firms waivers from the "Bad Actor" provisions of the securities laws pursuant to findings of misconduct.
Mandeville Financial Adviser Convicted of Stealing Up to $1.5 Million from Investors (DOJ Press Release) Ralph Willard Savoie pled guilty to mail fraud in connection with allegations that from around January 2013 through at least March 2016, he stole about $1.5 million by fraudulently telling investors that he would invest their funds in securities and insurance offering high rates of return, and described the investment opportunities as a "sure thing." In fact, Savoie diverted the funds for such personal uses as jewelry, hotels, restaurants, credit card bills, and rent. Further, he used some funds to pay off previously victimized investors. In furtherance of his fraud, Savoie concealed from victim investors that the Financial Industry Regulatory Authority had barred him from acting as a broker or otherwise associating with firms that sell securities to the public.
Body And Estate And Soul And A Counterfeiter And A Murderer And Merrill Lynch (BrokeAndBroker.com Blog) Today's BrokeAndBroker.com Blog considers allegations that Merrill Lynch caused the wrongful death of one of its customers. Yeah . . . I thought that opening sentence would get your attention. Let me further titillate you with the additional allegation that Merrill Lynch had assisted a prolific counterfeiter in defrauding the deceased customer. And if all of that doesn't entice you to read today's blog, you should know that it also includes three lovely music videos by Anita Baker, Amy Winehouse, Tony Bennett, and Billie Holiday -- as eclectic a group as you may ever find in the company of a murderer and counterfeiter (alleged as they may be).
SEC Charges Energy Storage Company, Former Executive in Fraudulent Scheme to Inflate Financial Results (SEC Press Release 2018-48) The SEC charged energy storage and power delivery product manufacturer Maxwell Technologies, Inc. and one of its former sales executives and corporate officers Van Andrews with fraudulently prematurely recognizing revenue as part of a scheme to inflate the company's reported financial results and, accordingly, better meet analyst expectations. The SEC also charged Maxwell's former CEO David Schramm and former controller James DeWitt for failing adequately to respond to red flags that should have alerted them to the misconduct. Without admitting or denying the findings that they caused certain violations by Maxwell, Maxwell and Andrews consented to an SEC Order and agreed to pay penalties of $2.8 million and $50,000, respectively. Andrews also agreed to be barred from serving as an officer or director of a public company for five years. Also, without admitting or denying the findings that they caused certain violations by Maxwell, Schramm agreed to pay a total of nearly $80,000 in disgorgement, prejudgment interest, and penalty and DeWitt agreed to pay a $20,000 penalty. READ the FULL TEXT SEC Order.
(SEC Press Release 20718-47) The SEC settled an administrative action against Kinross Gold Corporation for Foreign Corrupt Practices Act (the "FCPA") arising from the company's repeated failure to implement adequate accounting controls of two African subsidiaries. Even after some three years of attempting to implement FCPA policies and controls, the firm failed to maintain them. The SEC's Order finds that Kinross Gold violated books and records and internal accounting controls provisions of the federal securities laws. Without admitting or denying the findings, the firm agreed to a cease-and-desist order, a penalty of $950,000 and undertakings to report on its remedial steps for a period of one year. READ the FULL TEXT SEC Order.
Perennially Hopeless Battle On In JP Morgan FINRA Arbitration (BrokeAndBroker.com Blog)A few years ago I had the misfortune of getting involved in an estate matter, which, among other points in contention, included a Special Needs Trust or "SNT." Reduced to simplistic basics, an SNT is a legal construct that is designed to protect a "beneficiary" (typically a disabled individual) who is receiving Supplemental Security Income and Medicaid benefits. If the SNT is properly created and implemented, the disabled individual retains their government benefits and a trustee spends SNT funds on payments for certain goods and services for the disabled individual's benefit. When all goes well, the government does not calculate the SNT funds as disqualifying assets when determining the individual's ongoing eligibility. Of course, what in life generally goes well? As a recent FINRA arbitration demonstrates, SNTs are often the impetus behind the Lawyers Full Time Employment Act and prove that Jarndyce v Jarndyce (Bleak House, Court of Chancery, Charles Dickens, Chief Justice) was not a work of fiction.
Two Nigerian Citizens Sentenced for Participating in Wire Fraud Scheme Defrauding U.S. Victims of Millions (DOJ Press Release) Idowu Olugbenga Temetan aka David Cole and Adeltilewa Olamigoke Afolabi Ikuejuyone aka Kuffour Duval pled guilty to conspiracy to commit wire fraud and three counts of wire fraud; and Temetan also admitted to one count of passport forgery. Temetan was sentenced to 51 months in prison; Ikuejuyone was sentenced to 45 months in prison, and both are jointly and severally liable to pay $187,422.60 in restitution. As non-US Citizens, both defendants are expected to face deportation proceedings following their sentences.
(SEC Press Release 2018-46) The SEC filed a Complaint in the United States District Court for the Eastern District of New York against Niket Shah and Spark Trading Group LLC alleging that they had defrauded over 15 investors into contributing hundreds of thousands of dollars to two funds that Shah marketed. The SEC alleged that Shah lied about his success as a trader, Spark Trading's returns, and the use investors' money. Further, although the funds were losing money, Shah purportedly altered financial statements to make the funds appear profitable. Allgedly, Shah misused investor money for his own benefit and suffered substantial losses on the amounts actually invested. The SEC obtained a preliminary injunction and asset freeze against Niket Shah READ the FULL TEXT SEC Complaint.
Former CEO of Israeli Sales and Marketing Company Charged for Role in Fraudulent Binary Options Scheme Lee Elbaz, former CEO of the Israel-based company Yukom Communications, a purported sales and marketing company, was indicted in the United States District Court for the District of Maryland on one count of conspiracy to commit wire fraud and three counts of wire fraud in connection with alleged participation in a binary options scheme. Yukom allegedly provided investor "retention" services for two websites, known as BinaryBook and BigOption, that were used to fraudulently promote and market purported binary options.Jacksonville Man On Federal Supervised Release Sentenced To 41 Years In Federal Prison For Aggravated Identity Theft And Fraud Charges Following a guilty verdict by a federal jury in the United States District Court for the Middle District of Florida on nine counts of aggravated identity theft, nine counts of bank fraud, seven counts of false representation of a Social Security number, and three counts of mail fraud, Anthony Johnson was sentenced to 41 years in federal prison f and ordered to pay restitution. In part, Johnson falsely claimed to be a former member of the U.S. Army and used the Social Security numbers of two victims, including a lawyer from Seattle, to open a bank account and to obtain a loan and multiple credit cards from USAA in the names of his victims.