Securities Industry Commentator by Bill Singer Esq

May 16, 2018

Houston Firm Ordered to Stop Fraudulent Crypto Offering (TSSB Press Release)
The Texas State Securities Board entered an Emergency Cease and Desist Order to stop Wind Wide Coin Inc. and three sales agents from fraudulently offering investments in a cryptocurrency trading program that uses an "automatic trading bot" and purports to combine " "no risk" and extraordinarily high returns. Wind Wide Coin's marketing extends to a rotating sequence of celebrity and political endorsements. TSSB alleges that the company's website has featured a photograph of Jennifer Anniston, but identified her as "Kate Jennifer," an investor and a photograph of Prince Charles, who was identified as "Mark Robert," another investor who provided a testimonial. The testimonial was then attributed verbatim to a "Johnson Smith," supposedly a U.K. investor. The office address provided by Wind Wide Coin is for a location at which no building of any kind exists.  READ the FULL TEXT Order

SEC Files Charges in International Manipulation Scheme (SEC Press Release 2018-85)
The SEC filed a Complaint in the United States District Court for the Southern District of New charging Francisco Abellan Villena, Guillermo Ciupiak, James B. Panter Jr., and attorney Faiyaz Dean with violating antifraud and registration provisions of the federal securities laws. The Complaint alleges that the defendants manipulated the market for and illegally sold the stock of microcap issuer Biozoom Inc. through hidden ownership, offshore accounts, nominees, and through resort to manipulative trading techniques to artificially inflate Biozoom's share price in a manner that reaped nearly $34 million in unlawful proceeds. Separately, the SEC charged two registered representatives for their roles in the unregistered sales of Biozoom stock and a brokerage firm for supervisory and recordkeeping failures.  Previously, the SEC obtained a judgment against Abellan for his role in another market manipulation scheme.  
READ the FULL TEXT SEC Complaint; and Orders against
Karow and Legend Securities, and Scarpino

Colorado Court Shuts Down FINRA Over Expungement Confirmation ( Blog)
You ever go to a meeting where it seemed that everyone showed up on time, they started the presentations at the designated hour, and then, just as things began to roll, some idiot executive walks in late? Can someone please get me a cup of coffee, two sugars, a little milk, and, if there's a warm cheese danish left, I'll take that, otherwise, I'll take anything with cinnamon. Oh, where's the nearest outlet, I need to plug in my phone. Thanks -- please, don't allow me to interrupt anything. Did we already cover Item One in the agenda? You did? Sorry but could you just catch me up, briefly. Did we place orders for lunch yet? Yeah, there's always that idiot. Speaking of idiots arriving late and messing things up for everyone, consider a recent FINRA expungement arbitration in which the industry Claimant wins but FINRA decides to intervene by way of a partial objection in court to the confirmation of the award. 

Recidivist Securities Fraudster Edward Durante Sentenced To 18 Years In Prison For Securities Fraud, Money Laundering, And Perjury Offenses (DOJ Press Release)
When we talk about a long and checkered career, it is hard to imagine a better example than that of Edward Durante a/k/a "Ted Wise," a/k/a "Efran Eisenberg," a/k/a "Yulia," a/k/a "Ed Simmons." In 2001, Durante was sentenced to 121 months in prison, ordered to pay over $39 million in disgorgement and interest, and was barred from certain activities in the securities industry following his convictions for conspiracy to commit securities fraud, wire fraud, and money laundering, as well as making false statements in connection with a market manipulation scheme in which the defendant also used the alias "Ed Simmons."  After his release from prison, between 2009 and March 2015, Durante and his co-conspirator fraudulently induced at least 100 victims to invest over $15 million in private shares of VGTL, whose share price the conspirators manipulated. In August 2016, Durante, now 64 years old, pled guilty in the United States District Court for the Southern District of New York to to conspiracy to commit securities fraud, securities fraud, money laundering, and perjury and was sentenced to 215 months in prison plus three years of supervised release and ordered to forfeit $15,404,231.

Recidivist Defendant Pleads Guilty To Defrauding A Native American Tribe And Various Investors Through The Fraudulent Issuance And Sale Of More Than $60 Million Of Tribal Bonds (DOJ Press Release)
I'm guessing the folks at the United States Attorney's Office for the Southern District of New York are up to the letter "R" in their "Improve Your Word Power in 30 Days" book because this is the second press release today to have a headline beginning with "Recidivist." On September 28, 2016, Gary Hirst was convicted following a jury trial for manipulating the market for shares of NYSE-listed Gerova Financial Group, Ltd. and he was sentenced to 78 months in prison. Be that as it may Gary Hirst has now pled guilty to guilty to conspiracy to commit securities fraud, securities fraud, investment adviser fraud, and conspiracy to commit investment adviser fraud in connection with his scheme to defraud a Native American tribal entity and various investment advisory clients of tens of millions of dollars in connection with the issuance of bonds by the tribal entity and the subsequent sale of those bonds through fraudulent and deceptive means.  In pertinent part, the DOJ Press Release alleges that:

From March 2014 through April 2016, HIRST, along with his co-conspirators Jason Galanis, John Galanis, a/k/a "Yanni," Hugh Dunkerley, Michelle Morton, Devon Archer, and Bevan Cooney, engaged in a fraudulent scheme to misappropriate the proceeds of bonds issued by the Wakpamni Lake Community Corporation ("WLCC"), a Native American tribal entity (the "Tribal Bonds"), and to use funds in the accounts of clients of asset management firms controlled by HIRST and others to purchase the Tribal Bonds, which the clients were then unable to redeem or sell because the bonds were illiquid and lacked a ready secondary market.

The WLCC was convinced to issue the Tribal Bonds through false and fraudulent representations by John Galanis.  Once the Tribal Bonds were issued, HIRST and Morton used funds belonging to clients of two related investment advisers, Hughes Capital Management, Inc. ("Hughes") - where HIRST served as Chief Investment Officer - and Atlantic Asset Management, LLC ("Atlantic"), to purchase the Tribal Bonds, even though HIRST and Morton were well aware that material facts about the Tribal Bonds had been withheld from clients in whose accounts they were placed, including the fact that the Tribal Bond purchases fell outside of the investment parameters set forth in the investment advisory contracts of certain Hughes clients and of the Atlantic pooled investment vehicle in which the Tribal Bonds were purchased.  In addition, HIRST and his co-defendants failed to apprise clients of Hughes and Atlantic regarding substantial conflicts of interest with respect to the issuance and placement of the Tribal Bonds before the Tribal Bonds were purchased on these clients' behalf. 

Hughes and Atlantic clients were provided no prior notice that HIRST and Morton caused them to purchase the Tribal Bonds.  When these clients learned about the purchase of the Tribal Bonds in their accounts, several of them demanded that the Tribal Bonds be sold.  However, because there was no ready secondary market for the Tribal Bonds, no Tribal Bonds have been sold from any Hughes or Atlantic client accounts. 

In addition to Hirst's guilty plea, Jason Galanis was sentenced to 173 month in prison following his guilty plea to one count of conspiracy to commit securities fraud, one count of securities fraud, and one count of conspiracy to commit investment adviser fraud. Hugh Dunkerley pled guilty to one count of conspiracy to commit securities fraud, two counts of securities fraud, one count of bankruptcy fraud, and one count of falsification of records with the intent to obstruct a Government investigation, and he is awaiting sentencing. Defendants John Galanis, Michelle Morton, Devon Archer, and Bevan Cooney are awaiting trial and are presumed innocent unless and until proven guilty in a court of law beyond a reasonable doubt.