April 10, 2018
The United States District Court for the Southern District of New York ("SDNY") granted the SEC's request for a court order freezing over $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of NASDAQ-listed Longfin Corp. stock involving the company, its founding CEO and controlling shareholder, Venkata Meenavalli,, and corporate secretary and Longfin director Amro Izzelden "Andy" Altahawi, Dorababu Penumarthi, and Suresh Tammineedi. Longfin's stock price dramatically increased following announcement of the company's acquisition of a purported cryptocurrency business.
Following his guilty pleas, former wealth manager Leon A. Smith was sentenced today to 51 months in federal prison for wire fraud, identity theft, and money laundering in connection with his stealing nearly $1.3 million from professional athlete clients and misusing their identities during a scheme that ran from September 2011 through January 2015. Also, Smith was ordered to forfeit $1,298,506.82.
The SEC's Office of Investor Education and Advocacy (OIEA) and Retail Strategy Task Force issued a warning to investors about Ponzi schemes that prey on senior investors. In part the Investor Alert notes three purportedly classic warning signs of a Ponzi scheme:
- Promises of High Returns with Little or No Risk. Guaranteed high investment returns are the hallmark of a Ponzi scheme. Every investment has risk, and the potential for high returns usually comes with high risk. If it sounds too good to be true, it probably is.
- Unlicensed and Unregistered Sellers. Most Ponzi schemes involve individuals or firms that are not licensed or registered. Even if an investment professional comes across as likeable or trustworthy, use the free search tool on Investor.gov to check whether the person is licensed and registered.
- Overly Consistent Returns. Investment values tend to fluctuate over time. Be skeptical of an investment that generates steady positive returns regardless of market conditions
A word to the wise: It's tax season! A word to the wary: It's tax season! As folks are scrambling around to come up with the funds for this year's tax bite, it's inevitable that many will come up short. Some will beg. Some will borrow. Some will steal. It's easy enough to urge you to keep a close eye on transfers out of your bank and brokerage accounts, but what about your elderly grandparents, parents, and other family-members and friends? Similarly, what about those in failing health that compromises their abilities to monitor their finances? Today's BrokeAndBroker.com Blog sets off a bright, red warning flare in the form of a Financial Industry Regulatory Authority settlement involving a wayward stockbroker who apparently engaged in a bit of self-help when it came to paying her taxes.
FINRA Department of
Enforcement, Complainant, v. Gerard
Chandler Gremillion, Respondent.
(FINRA OHO Hearing Panel Amended Decision, FINRA Proceeding No. 2015044600801, April 5, 2018) http://www.finra.org/sites/default/files/fda_documents/2015044600801%20GERARD
Respondent Gremillion , representing himself pro se, was found to have willfully failed to update his Form U4 to disclose two tax liens, a
bankruptcy filing, and a civil monetary judgment, and provided a false answer
in an amendment to his Form U4. For these violations, Respondent is suspended
from associating with any FINRA member firm in any capacity for two years and
fined $20,000. The Panel's finding of willfulness subjects him to statutory
disqualification. Respondent is also assessed the costs of the hearing.
SEC Voluntarily Dismisses Claims Against Benjamin Wey and Co-Defendants (SEC Litigation Release No. 24105 / April 9, 2018) Securities and Exchange Commission v. Benjamin Wey, et al. (SDNY, 15-CV-07116)
READ BrokeAndBroker.com Blog's Benjamin Wey Archive
As set forth in the SEC's Litigation Release:
On September 1, 2017, the Securities and Exchange Commission voluntarily dismissed its claims against defendants Benjamin Wey, New York Global Group, Michaela Wey, Robert Newman, and William Uchimoto. In bringing charges against these defendants, the SEC had relied on evidence that was later suppressed in a parallel criminal proceeding and determined that its ability to rely on the suppressed evidence may also be affected. On September 1, 2017 and October 27, 2017, the SEC voluntarily dismissed its claims against relief defendants Advantage Consultants, Ltd., York Capital Management, Ltd., Four Tong Investments, Ltd., Strong Growth Capital, Ltd., Median Assets Investments, Ltd., and Han Hua, Ltd., as those entities had been dissolved. On March 8, 2018, the SEC voluntarily dismissed its claims against Tianyi Wei. The SEC's litigation against Seref Dogan Erbek is continuing. The SEC's complaint alleges violations or the aiding and abetting of violations of the antifraud provisions and the disclosure and reporting provisions of the federal securities laws.
SEC Charges Texas Company, Principals in Multimillion Dollar Ponzi Scheme Targeting Seniors (SEC Press Release 2018-63) https://www.sec.gov/news/press-release/2018-63
The SEC filed a Complaint in the United States District Court for the Southern District of Texas charging two Texas companies and their principals in a $2.4 million Ponzi scheme and in a related, $1.4 million offering fraud targeting retirees.Securities and Exchange Commission, Plaintiff, v. The LIfepayGroup, LLC, SMDRE LLC, Clifton E. Stanley, and Michael E. Watts, Defendants (Complaint, SDTX, 18-CV-1098). READ the FULL TEXT Complaint https://www.sec.gov/litigation/complaints/2018/comp-pr2018-63.pdf
As set forth in part, the SEC Press Release alleges that:
[F]rom 2010 to 2017, Clifton E. Stanley ran a Ponzi scheme through his retirement planning and real estate investment business, The Lifepay Group, LLC. Stanley is alleged to have lured at least 30 elderly victims to invest approximately $2.4 million of their retirement savings with baseless promises and claims of outsized investment returns. He kept the scheme afloat for years by paying early investors with later investors' funds and by convincing investors to roll over their investments. The SEC further alleges that Stanley pilfered from the estate of an elderly woman's family trust, diverting nearly $100,000 to fund the Lifepay Ponzi scheme. In addition, the SEC's complaint alleges that, beginning in 2015, Stanley and Michael E. Watts orchestrated a second offering fraud through a company they controlled, SMDRE, LLC. Stanley and Watts allegedly used a collection of misrepresentations and empty promises to convince a group of predominantly elderly victims to invest roughly $1.4 million in SMDRE.
Stanley is alleged to have used roughly $1.3 million of the Lifepay offering proceeds for personal expenses, including country club memberships, daily living expenses, travel, and entertainment expenses. In addition, Watts and Stanley allegedly engaged in shell game transactions so they could use the vast majority of SMDRE investor funds for personal expenses and to keep the Lifepay Ponzi scheme afloat.