Securities Industry Commentator by Bill Singer Esq

September 6, 2018

In the Matter of FINRA Department of Enforcement, Complainant, v. Mark C. Cohen, Respondent. (Office of Hearing Officers, Order Accepting Offer of Settlement, No. 2014040761001).
Without admitting or denying the allegations of the Complaint and solely for the purposes of FINRA's proceedings, Respondent Cohen consented to the imposition of the sanction of a Bar. While registered with FINRA member firm MetLife Securities, Inc., Cohen obtained at least $14,6060.94 in reimbursements for false expense reports because the corresponding pre-approved client marketing events did not occur and, therefore, he did not incur any costs As set forth in Paragraph 18 of the Order, Cohen apparently submitted the following:

March 28, 2012: New York Knicks Basketball Game $1,314.15 
June 5, 2012: Dinner at Porter House Restaurant $2,700.00 
July 24, 2012: Dinner at The Palm Restaurant $1,630.54 
October 25, 2013: Dinner at Avenue Restaurant Group $2,962.25 
November 23, 2013: Kanye West Concert $6,000.00

GUEST BLOG: Labor's Belabored Day By Aegis Frumento Esq ( Blog)
NYU sociologist Richard Sennett researched back-office employees of Wall Street firms in the wake of the 2008 subprime mortgage collapse, and he recounts the industry's long decline, as short-term profits displaced loyalty and culture as business objectives. Mid-level and lower officers soon began thinking that the executives to whom they reported in revolving-door fashion were incompetent hustlers rather than financial professionals. With lack of respect all around, employees with decades of experience were thrown out on the Street with barely a fare-thee-well as firms scrambled to regain quarterly profitability. There will be more of this to come, as blockchain and other technologies threaten to eliminate hundreds of traditional Wall Street positions.

In a Complaint filed in the United States District Court for the Northern District of Texas, the SEC charges  with securities fraud and violations of the registration provisions of the federal securities laws in connection with allegations that they defrauded investors out of over $3.3 million through false promises of massive returns in cannabis-related businesses.  The Complaint alleges that Cone employed boiler room sales staff, who made cold calls to investors and promised them up to 24 percent annual returns from investments in Greenview.  Allegedly, Cone used an alias to conceal his prior criminal convictions, lied about having a former U.S. Drug Enforcement Administration agent on staff, and falsely claimed to have a long record of profitably investing millions in cannabis-related businesses.  Cone allegedly spent investors' money on designer clothes and luxury cars, and on payments to earlier investors to prolong the alleged scheme. The SEC release asserts that Cone agreed to an officer-and-director bar and a permanent injunction, and that the Court will determine disgorgement and prejudgment interest.  In a parallel criminal proceeding, the U.S. Attorney's Office for the Central District of California charged Cone and seized approximately $1.4 million in cash and assets. READ the FULL TEXT COMPLAINT

SEC Charges Two Men With Fraud in Fake Trading Accounts Scheme (SEC Release 2018-178)
Michigan Man Admits Role in Worldwide Trading Account Simulator Scheme; Another Conspirator Indicted / Scheme targeted hundreds of investors in more than 30 countries (DOJ Press Release)
In a Complaint filed in the United States District Court for the District of New Jersey, the SEC charged Jeffery Golman and Christorpher Eikenberry with fraud and aiding and abetting fraud for their roles in a fake accounts scheme perpetrated by a phony day-trading firm, Nonko Trading. The Complaint alleges that over 260 Nonoko's customers were defrauded out of at least $1.4 million when they deposited funds into what they thought was Nonko's state-of-the-art platform for day-trading professionals. Allegedly, customers' funds were diverted to personal expenses and for Ponzi-like payments to customers who wanted to close their accounts. Allegedly, Nonko deliberately targeted traders who were inexperienced or had a history of trading losses and lured them by promising generous leverage, low trading commissions, and low minimum deposit requirements.  In a parallel action, the U.S. Attorney's Office for the District of New Jersey today announced criminal charges against Goldman and Eikenberry. Eikenberry pled guilty to an Information charging him with one count of conspiracy to commit securities fraud. Goldman was indicted on one count of conspiracy to commit securities fraud and one count of wire fraud. Previously, the SEC had charged Naris Chamroonrat and Adam Plumer, who have settled the SEC's charges. Chamroonrat also pled guilty in a parallel criminal case and is awaiting sentencing. Also, the SEC had previously charged Yaniv Avnon and Ran Armon, whose cases are pending -- and they were both also named in a pending criminal case. READ the FULL TEXT:

Goldman Indictment
Eikenberry Information
Robert Glen Mouritsen was indicted in the United States District Court for the District of Utah on three counts of wire fraud and three counts of money laundering in connection with his alleged fraud perpetrated on friends and fellow church members to give him money to further a financial fraud scheme he called "The Project."  Allegedly, the Project involved a series of complicated international transactions that would replace fiat money with an asset-backed currency system with the backing of several governments. Mourtisen failed to tell investors that The Project had failed to produce any returns in over a decade and that he had used significant amounts of investors' funds for his own personal use and benefit.  

In the Matter of Lincoln Investment Planning, LLC,, Respondent (AWC 2017053723701, August 5, 2018).
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Lincoln Investment Planning, LLC,, submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In accordance with the terms of the AWC, FINRA imposed upon Lincoln a Censure and a plan of Remediation. FINRA member firm Lincoln Investment Planning has about 1,506 registered representatives at some 421 branch offices. Under the heading "Overview", the AWC states that:

Between January 1, 2011 and June 27, 2018 (the "Relevant Period"), Lincoln disadvantaged certain retirement plan and charitable organization customers who were eligible to purchase Class A shares in certain mutual funds without a frontend sales charge ("Eligible Customers"). These Eligible Customers were instead sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses. During this period, Lincoln failed to establish and maintain a supervisory system and written supervisory procedures reasonably designed to ensure that Eligible Customers who purchased mutual fund shares received the benefit of applicable sales charge waivers. As a result, Lincoln violated NASD Conduct Rule 3010 (for misconduct before December 1, 2014), FINRA Rule 3110 (for misconduct on or after December 1, 2014), and FINRA Rule 2010. 

In fashioning the appropriate sanctions, FINRA asserts the following in the AWC:

In resolving this matter, FINRA has recognized the extraordinary cooperation of Lincoln for: (1) initiating an investigation to identify whether Eligible Customers received sales charge waivers during the Relevant Period, and self-reporting its findings to FINRA; (2) providing restitution to Eligible Customers for a period of seven and one-half years; (3) promptly establishing a plan of remediation for Eligible Customers who did not receive appropriate sales charge waivers; (4) promptly taking action and remedial steps to correct the violative conduct, including by making programming changes to preclude ongoing customer harm as the Firm instituted permanent systems upgrades; and (5) employing subsequent corrective measures, prior to detection or intervention by a regulator, to revise its procedures to avoid recurrence of the misconduct. 

SEC Charges Former President of Tennessee-Based Company for Deceiving Investors as to Role of Two Convicted Criminals in Oil Investment Scheme (SEC Litigation Release No. 24256}
In a Complaint filed in the United States District Court for the Southern District of Georgia, the SEC charged Robert William Dorrance, the former president of Southern Energy Group, Inc., with concealing from investors that two convicted criminals ran the company and led a $15 million oil investment scheme affecting more than 150 investors. Dorrance's main work experience was as a former stereo salesman and he largely performed clerical and administrative work at the direction of the two convicted criminals. Dorrance agreed to be permanently prohibited from violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and to pay $101,075 in disgorgement plus interest, and $42,500 in civil penalties, for a total of $143,575. READ the FULL TEXT COMPLAINT
Following his jury conviction in the United States District Court for the District of Maryland, Mohammed "Kofi" Kwaning was sentenced to 121 months in prison, three years of supervised release, for conspiracy to commit bank and wire fraud, as well as bank and wire fraud, and aggravated identity theft.  Federal prosecutors alleged that Kwaning and his co-conspirators attempted to steal nearly $1.4 million in funds from the personal, retirement, and business accounts of various victims after the conspirators had acquired account information of individual victims, including from investment account management firms, as well as forged checks containing bank account information of both individual and corporate victims from across the United States. As set forth in part in the DOJ Release:

Co-conspirator Issah Mohammed then recruited individuals, including Mark Dennis, Charles Mensah, and others, who registered corporate shell entities with the state of Maryland.  The recruits then set up bank accounts at multiple banking institutions in the names of these shell entities. Mohammed Kwaning then either directed that the funds from the compromised accounts be wired into the bank accounts opened in the names of the shell entities or provided altered or fabricated checks from compromised accounts to Issah Mohammed.  Mohammed then provided the checks to Mark Dennis, Charles Mensah, and the other recruits to be deposited into the shell entities' bank accounts.  The recruits would then attempt to withdraw the stolen funds before the banks discovered that the source of the funds were compromised accounts.

Some of the accounts were compromised by individuals who called investment firms pretending to be the actual account holders, and then eventually providing enough correct answers in order to reset the password for the account.  Individuals also hacked the e-mails of victims and, posing as the account holders, requested funds be wired from their retirement accounts to the bank accounts of the shell corporations controlled by the conspirators.  The attempted loss during the nine months of the scheme was over $1.3 million, and the conspirators were able to withdraw over $229,000 of stolen funds, which they then split amongst themselves.

Mark Dennis, age 30, of Laurel, Maryland, and Charles Mensah, age 32, of the Bronx, New York, were also convicted at trial and sentenced to 27 months and 30 months in prison, respectively, each followed by five years of supervised release.  Issah Mohammed, age 31, of Laurel, previously pleaded guilty to his role in the scheme and is awaiting sentencing.