Securities Industry Commentator by Bill Singer Esq

June 20, 2018

SEC Shuts Down $102 Million Ponzi Scheme (SEC Press Release 2018-110)
Perry Santillo. Christopher Parris, Paul LaRocco, John Piccarreto, and Thomas Brenner, and three companies that they controlled: First Nationle Solution LLC, United RL Capital Services, and Percipience Global Corp. were charged in a Complaint filed by the SEC in the United States District Court for the Southern District of New York with violating the antifraud provisions of the federal securities laws. The Court imposed an asset freeze and a temporary restraining order. The Complaint alleges that the defendants had engaged in a $102 million Ponzi scheme in which defendants spent at least $20 million to enrich themselves, paid $38.5 million in Ponzi-like payments, and transferred much of the remainder in transactions that appear unrelated to the issuers' purported businesses. READ the FULL TEXT Complaint
NOTE: In response to "FINRA Buries the Lede With FAS Rep Settlement" ( Blog, June 26, 2017) several alleged victims contacted Blog and were forwarded to FINRA, SEC, and/or FBI.

For the policy wonks among my readers: U.S. Securities and Exchange Commission / STRATEGIC

Merrill Lynch Admits to Misleading Customers about Trading Venues / Will Pay $42 Million Penalty to Settle Charges (SEC Press Release 2018-108)
The SEC charged Merrill Lynch, Pierce, Fenner & Smith with falsely informing customers that it had executed millions of orders internally when it actually had routed them to other broker-dealers, including proprietary trading firms and wholesale market makers. Merrill Lynch called this practice "masking," which required the firm to reprogram its systems to falsely report execution venues, altering records and reports, and providing misleading responses to customer inquiries.  Merrill Lynch's use of masking fostered the false appearance that the firm was a more active trading center, which reduced access fees it typically paid to exchanges. In response to the allegations, Merrill Lynch agreed to settle the charges, admit wrongdoing, and pay a $42 million penalty.READ the FULL TEXT SEC Order    

Is FINRA Sleepwalking Through Member Firm Examinations? ( Blog)
In today's Blog we consider a compelling FINRA regulatory settlement involving a member firm's deficient written supervisory procedures. The self-regulatory-organization provides its members with something amounting to a primer on how to debug various policies and procedures. Those of us who are veterans to the industry's compliance scene know all too well the many written procedures that are littered with such useless terms as "[INSERT NAME]" or "TBD". Imagine there's a fire in your building and you come upon a fire box that says "In the event of fire pull handle" but there's no handle. Not a great time to be thinking up a Plan B. Notwithstanding FINRA's strong case, the regulator still has some explaining to do. Sort of like the fire department inspector who should have noticed during each and every inspection over the last five years that there was no handle attached to the fire box that was supposed to have one.  

Arizona Man Sentenced to Prison for Distributed Denial of Service Attacks against Emergency Communications System and Other Municipal Websites (DOJ Press Release)
Federal prosecutors alleged that Between March 9 and March 14, 2015, Tucker executed a series of distributed denial of service (DDoS) attacks against various city websites. In addition to disabling the City of Madison's website, Tucker crippled the city's Internet-connected emergency communication system, causing delays and outages in the ability of emergency responders to connect to the 911 center and degrading the system used to automatically dispatch the closest unit to a medical, fire, or other emergency. After pleading guilty to one count of intentional damage to a protected computer, Randall Charles Tucker, a/k/a "Bitcoin Baron," was sentenced in the United States District Court for the District of Arizona to 20 months in prison and ordered to pay $69,300 restitution. 

Dallas Oil-And-Gas Company, CEO Settle $8 Million SEC Fraud Suit (SEC Litigation Release No. 24169)
In a Complaint filed in the United Sttates District Court for the Northern District of Texase, the SEC Texas Coastal Energy Company, LLC (TCEC) and chief executive officer Jefferey Gordon with violations of Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC also charged Gordon with violating Section 15(a) of the Exchange Act based on his alleged role as an unregistered broker. The Complaint alleged that Gordon and TCEC deceived at least 80 investors into investing over $8 million by lying about TCEC's experience and track record, the advice and success rate of its geologists, the potential reserves on its prospects, the potential return on investments therein, and the manner in which TCEC would use investor funds. TCEC and Gordon purportedly misappropriated over $2.6 million of investor funds for their own use. Without admitting or denying the SEC's allegations, TCEC and Gordon consented to the entry of a final judgment that permanently restrains and enjoins them from violating these provisions. TCEC and Gordon also agreed to be restrained and enjoined from certain activities in connection with the purchase, offer and sale of securities in the future. Additionally, TCEC and Gordon will be ordered to pay disgorgement, prejudgment interest and civil penalties totaling $7.2 million. Finally, Gordon has offered to consent to associational and penny stock bars.READ the FULL TEXT Complaint