Securities Industry Commentator by Bill Singer Esq

April 6, 2018

Order Filed to Stop Cryptocurrency, Marijuana Investments (Texas State Securities Board Release)
TSSB entered an Emergency Cease and Desist Order against alleged Mark J. Moncher, who was offering investments in an unregistered cryptocurrency trading program that purportedly delivers returns of 8% per week. Moncher alleged published an online advertisement targeting Texas residents, who were directed to a website containing information about both offerings. TSSB alleges that Moncher controls the Financial Freedom Club Inc. and has concealed from investors his 2009 federal mail and wire fraud convictions for which he was sentenced to 57 months in federal prison plus three years of supervised release, and ordered to pay $2 million in restitution. 

Also, TSSB  alleges that Moncher and his company are offering the cryptocurrency trading program together with 911MoneyStore Inc, whose principal Frank Dalotto is representing that he is working with an undisclosed " trader with excellent results," Dalotto is purportedly telling potential investors that to avoid securities laws, he and 911MoneyStore "really don't want to portray this as an investment in crypto" and will refer to the profit payments as a "commission."

Further TSSB alleges Financial Freedom Club, Moncher, and another company,Capital Cash, are selling unregistered promissory notes in a California marijuana growing operation The notes are supposedly being issued by Estrada Trucking Inc. and its CEO, Caleb Estrada Vasquez. The marijuana investment is allegedly structured as an unsecured loan to Estrada Trucking, which promises that an initial $10,000 investment will generate a 50% every four weeks for a profit of $5,000.

(SEC Litigation Release No. 24093)
The SEC filed a Complaint in the United States District Court for the Southern District of New York ("SDNY") alleging that former Apollo Management L.P. senior partner Mohammed Ali Rashid had defrauded clients by secretly billing them for about $290,000 in personal expenditures, including his family vacations, visits to a hair salon, and purchases of designer clothing and high-end electronics. Among the SEC's allegations is that Rashid doctored a receipt for his purchase of a $3,500 suit for his father in order to give the transaction the appearance of a business expense. Despite being caught by the firm and told to stop on two occasions in 2010 and 2012, Rashid allegedly continued to expense personal items to clients into 2013. READ the FULL TEXT Complaint Securities and Exchange Commission v. Mohammed Ali Rashid (Complaint, SDNY, 17-CV-8223).

California Man Pleads Guilty To Multimillion-Dollar Fraud On Film Investors (DOJ Press Release)
From 2009 through 2017, Steven Brown and co-conspirators solicited millions of dollars for investments in the marketing and production of feature-length films and documentaries from investors, including by furnishing them with fraudulent documents and by promising guaranteed returns. The proceeds were primarily used to fund projects other than those presented, to engage in a Ponzi-like scheme by which previous victims were paid, and to cover personal expenses including Brown's purchase of a condominium. Brown pled guilty to one count of conspiring to commit wire fraud

Crash And Burn Upon Entry Into Wall Street ( Blog)
Most of us run into some problems during our lifetimes. For some of us, the resolution of such issues may be to pay a fine or sit down for a suspension or promise never to do something again. In some cases, our problems involve dealing with a government agency and the sanctions that they hand down may be so severe as to amount to the ending of a career -- which often prompts folks to seek work elsewhere and try to start over. In a recent FINRA disciplinary settlement, we come across the tale of a former escrow agent who wound up getting fined and barred by two different states in 2013 and 2014 respectively. Perhaps trying to start anew, this individual attempted a new career in the securities industry. Sometimes you can run from your past. Sometimes you can't. Today's Blog examines the latter variation. Another story of crash and burn on Wall Street. READ

Defendant in SEC Cases Involving Ticket Resale Investment Schemes Sentenced to More than Six Years' Imprisonment in Parallel Criminal Case
(SEC Litigation Release No. 24099)
In 2017, the SEC filed two enforcement actions  in the United States District Court for the Southern District of New York ("SDNY") against Joseph Meli. The first Complaint alleged that Meli and his co-defendants had solicited investments for the bulk purchase and resale of tickets to popular Broadway shows and concerts, but used the majority of the more than $97 million raised to make payments to earlier investors and to enrich Meli, his family, and a co-defendant. SDNY entered a preliminary injunction and asset freeze. The second Complaint alleged that Meli and New York sports radio personality Craig Carton raised millions from investors by falsely claiming that they had access to large blocks of face-value tickets to popular concert performances. Carton and Meli allegedly misappropriated at least $3.6 million to repay earlier investors in a Ponzi-like scheme and to cover other expenses, including Carton's gambling debts. 
  • Securities and Exchange Commission v. Joseph Meli, et al., No. 17-CV-632 (S.D.N.Y.)
  • Securities and Exchange Commission v. Craig H. Carton, et al., No. 17-CV-6764 (S.D.N.Y.)
  • United States v. Steven Simmons and Joseph Meli, No. 17-CR-127 (S.D.N.Y.)
Meli pled guilty to securities fraud and was sentenced to 78 months in prison plus three years supervised release, and ordered to pay a $104,565 forfeiture and restitution in an amount to be determined. 

SEC Charges Investment Adviser with Engaging in Ponzi-like Scheme (SEC Litigation Release No. 24094 )
The SEC filed a Complaint in the United States District Court for the Southern District of New York ("SDNY") alleging that starting around 2010, Michael Scronic began to raise money from at least 42 friends and acquaintances to invest in an options trading strategy. Although Scronic purportedly asserted that the investment was liquid and redemptions would be quickly satisfied, the SEC asserts that Scronic had sustained at least $15 million in investment losses since April 2010. For the period ending June 30, 2017, Scronic allegedly reported to investors total assets of at least $21,837,475; but the June 30, 2017, balance was just under $27,500. Scronic allegedly resorted to Ponzi-like practices in order to obtain additional investment funds to satisfy redemption requests In a parallel action, the U.S. Attorney's Office for the Southern District of New York announced criminal charges against Scronic.

(SEC Litigation Release No. 24101)
The SEC alleged that Merrill Robertson, Jr., Sherman C. Vaughn Jr., and the company they co-owned, Cavalier Union Investments LLC, promised to invest in diversified holdings but stole nearly $6 million of the more than $10 million they raised from investors. The $6 million in diverted proceeds was spent on personal expenses such as cars, family vacations, repayment of mortgage and credit-card debt, luxury goods, clothing, entertainment, educational expenses for family members, and a luxury suite at a football stadium. They also used the stolen money to make various donations and gifts to alma maters, churches, and other third parties. Robertson, who was criminally charged based on the conduct alleged by the SEC, was sentenced to 40 years' imprisonment, ordered to pay over $8 million in disgorgement, and permanently enjoining him from violating federal securities laws.