Securities Industry Commentator by Bill Singer Esq

May 14, 2018

Moshe Marcel Ajdler, Plaintiff/Appellant v. Province of Mendoza Defendant/Appellee (Order, United States Court of Appeals for the Second Circuit, 17-CV-2704 / May 11, 2018)
As set forth in the Syllabus to the 2Cir Order:

On appeal from a judgment entered in the Southern District of New York (Marrero, J.), dismissing as untimely this contract action pertaining to defendant's unpaid bonds, plaintiff challenges that part of the district court's ruling regarding his claim for interest.  Plaintiff maintains that, even if the statute of limitations-which he argues is six years as provided by statute, rather than four years as stated in the bonds' Indenture-bars his claim for unpaid principal, interest continued to accrue for as long as the principal remained unpaid, such that his claim for interest accruing within six years of the filing of his complaint is timely.  Because existing New York law does not clearly settle whether claims for interest on principal continue to accrue after a claim for the principal itself is time‐barred, we certify questions pertaining to that issue to the New York Court of Appeals, deferring our resolution of this appeal in the interim.


As set forth in the 2Cir Order:

To summarize, we defer decision in this case, and certify to the New York Court of Appeals the following questions: 

1. If a bond issuer remains obligated to make biannual interest payments until the principal is paid, including after the date of maturity, see NML Capital v. Republic of Argentina, 17 N.Y.3d 250, 928 N.Y.S.2d 666 (2011), do enforceable claims for such biannual interest continue to accrue after a claim for the principal of the bonds is time‐barred? 

2. If the answer to the first question is "yes," can interest claims arise ad infinitum as long as the principal remains unpaid, or are there limiting principles that apply? 

In certifying these questions, we do not bind the Court of Appeals to the particular questions stated.    Rather, the Court of Appeals may expand this certified inquiry to address any pertinent questions of New York law involved in this appeal.6  
Footnote 6: While perhaps not necessary to the resolution of this case, another question that arises from the identified legal ambiguity is whether, if the answer to the first question is "no," claims for interest that accrued before a claim for the principal of the bonds is time‐barred expire when the principal claim becomes time‐barred.  We leave to the New York Court of Appeals whether to address this related question of New York law.

FINRA Arbitrator Recommends Multiple Expungements For Veteran Stockbroker ( Blog)
It seems that each week there are increasing numbers of arbitrations filed with FINRA seeking expungement of various matters from a registered rep's industry record. Must be bringing in a nice chunk of change to the self-regulatory-organization via filing fees, membership fees, hearing fees, and the like. Of course, given the explosion of such cases, we should also be asking if these matters truly belong before an arbitration panel and not within the regulatory framework. Why is it that so many disclosures are being deemed non-disclosable? Why are so many allegations being questioned and rejected? Should there be more scrutiny of customer allegations and employer claims before they are carved into a industry employee's record? Should we be concerned that too much is being removed from the public record? Is anyone asking either of those questions? 

Tossing Fish and Catching Capital: Remarks at the Washington State Bar Association (Speech by SEC Commissioner Hester Pierce)
This is why I'm often puzzled when investor protection is presented as somehow in opposition to capital formation. The SEC's tripartite mission-to facilitate capital formation, protect investors, and maintain fair, orderly, and efficient markets-works as a cohesive whole. No one mandate is in tension with another, and focusing on one doesn't mean sacrificing another. While investor protection means deterring and punishing truly bad actors, it also means not erecting barriers that prevent investors from accessing investment. Facilitating capital formation means, in part, facilitating investor opportunity.

Dominican National Pleads Guilty to International E-Mail Impersonation and Fraud Scam (DOJ Press Release)

Federal prosecutors alleged that from at least June 2015 through November 2017, Leonel Alexis Valerio Santana conspired with others to defraud at least 95 victims by pretending to be employees of the Securities and Exchange Commission and demanding in excess of $1.3 million from victims. Upon receipt, the conspirators generally withdrew the funds it from bank accounts and forwarded much of it to individuals in the Dominican Republic. Valerio Santana pled guilty in the United States District Court for the District of Massachusetts to conspiracy to commit money laundering and conspiracy to commit wire fraud. As set forth in part in the DOJ Press Release:

[I]n one common version of the scam, victims received e-mails that used official-seeming documentation with the SEC seal to support a false claim that the victim must pay a fee in order to receive a portion of a legal settlement. In another version of the scheme, victims received e-mails and official-seeming documents labeling the victim as a defendant in a civil lawsuit alleging that the victim owed tens of thousands of dollars in supposed disgorgement, penalties and fees. The documents gave the victim a choice of either appearing in court to contest the lawsuit or paying a smaller fee.
Wilson Lasset and his business Triangle International Training Center prepared prepare and electronically filed with the Internal Revenue Service about 1606 tax returns on behalf of other people seeking over $2.7 million in fraudulent tax refunds of which the IRS paid about $788,611. At least 25 of the cited returns used the names and social security numbers of individuals with cerebral palsy who did not need to file tax returns and 386 of the returns used the identities of incarcerated individuals, and in both situations, the individuals did not authorize Lasset to file their tax returns.  The cited returns claimed earned income tax credits based on false claims of earning income as "household help" employees, and falsely claimed education credits designed to reimburse college and other higher education expenses. Lasset pled guilty tin the United States District Court for the Southern District of Florida to one count of wire fraud and one count of aggravated identity theft.

Canadian Who Operated Unlicensed Bitcoin Trading Business Sentenced / Defendant Engaged in Bitcoin Exchanges with Undercover Agents despite Knowledge the Money was Drug Trafficking Proceeds (DOJ Press Release)
Louis Ong was sentenced after pleading guilty in the United States District Court for the 
Western District of Washington to operating an unlicensed money transmission business and was sentenced  to 20 days of incarceration plus three years of supervised release and ordered to forfeit over $1 million. As set forth in part in the DOJ Press Release:

[I]n December 2016, federal law enforcement responded to an ad ONG had placed regarding buying and selling bitcoin - a cryptocurrency that can be used for purchases on the dark web and elsewhere.  Later in December, and again in February and March 2017, ONG traveled to the Seattle area to exchange cash for bitcoin.  At various times the undercover agents specifically told ONG that the funds they were exchanging for bitcoin came from drug trafficking.  ONG repeatedly told them he did not want to hear that so that he had ‘plausible deniability.'

In May 2017, ONG was observed by other HSI agents in Blaine, Washington running cash through a bill counter while sitting in his car.  The agents informed him he needed to register as a money remitter with FinCEN, a bureau of the U.S. Treasury whose mission is to safeguard the financial system from illicit use and money laundering.  ONG registered with FinCEN, and informed Homeland Security that he had done so.  However, even after registering he failed to follow FinCEN regulations requiring the reporting of suspicious transactions - including three more with undercover agents.