Securities Industry Commentator by Bill Singer Esq

September 27, 2018

Johnny E. Burris, Plaintiff, v. J.P. Morgan Chase & Co., and J.P. Morgan Securities, LLC (Complaint; 18-CV-03012)  Former JP Morgan employee and high-profile whistleblower Johnny Burris filed a Complaint in the United States District Court for the District of Arizona seeking employment reinstatement, an injunction compelling alleged hostile-workplace remediation, back pay, at least $1 million in damages, expungement, posting of a notice of compliance with the whistleblower provisions of Sarbanes-Oxley and Dodd Frank, restitution, costs, and fees. 
Bill Singer's Comment: I will not engage in any sham here and, as such, I will clearly and unequivocally note that I am wholly biased in Burris's favor and hope that he prevails against JP Morgan. Although we have never met in person, over the years,  it has been my pleasure to have communicated with Burris and to come to view him as a principled Wall Street reform advocate and someone victimized by both industry politics and FINRA's large-firm bias. See Blog's coverage of Burris and his ordeal at Give 'em hell, Johnny!!! 
READ the FULL TEXT Complaint

As set forth in the "Introduction" to Burris' Complaint:

1. Plaintiff, Johnny E. Burris, files this complaint of whistleblower retaliation pursuant to the employee protection provisions of the Sarbanes-Oxley Act of 2002, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Plaintiff alleges that he was wrongfully terminated from his employment, and thereafter blacklisted by the Defendants. This termination and blacklisting was motivated in whole or in part because Plaintiff objected to pushing proprietary J.P. Morgan Private Bank Managed Accounts, Chase Strategic Portfolio Managed Accounts, and proprietary mutual funds into his clients' portfolios on the grounds that he viewed such "bank managed products" as not always suitable for his retired clients. After he was wrongfully terminated, Defendants blacklisted Plaintiff by drafting three false customer complaints that were then sent to the Financial Industry Regulatory Authority (FINRA) and made public. 

2. Following an investigation by a duly-authorized investigator, the Secretary of Labor, acting through his agent, the Regional Administrator for the Occupational Safety and Health Administration (OSHA), Region IX, found reasonable cause to believe that Defendants violated SOX in both terminating and blacklisting the Plaintiff.
The SEC runs the country's best lottery. You have a 1-in-350 chance to win overall, and a 1-in-40 chance if you make the first cut, which a good lawyer can help you do. Now the SEC is looking to raise the minimum prize to $2 million for as many as 16% of the winners. And every year, a few hit jackpots in the tens of millions of dollars. No state or national lottery gives you better odds. I'm talking, of course, of the SEC's whistleblower program. 

Before Witnesses Clam Up, Feds Scale New Depths And Avoid Tanking Seafood Criminal Cases As Charges Are Taken Off Ice Against Big Fish and Small Fry:

James R. Casey, owner of Casey's Seafood Inc., pled guilty to conspiracy to falsely label over 183 tons of crab meat as part of a conspiracy to replace the much beloved and often maligned Atlantic Blue Crab with not-so-beloved and often over-rated crab meat from Indonesia, China, Thailand, Vietnam, and Central/South America. Unknown to many, in 2010, Callinectes sapidus (the Latin name for Atlantic Blue Crab) began a decline, which made it harder to harvest and, accordingly, drove up its price. Faced with diminishing supplies of Blue Crab, Casey used foreign crab meat from such tongue-twisting varieties as Portunus pelagicus, Portunus haanii, and Ovalipes punctatus (the latter should not be confused with Ovaltine, which is not a crab but a beverage of dubious paternity). Casey unpacked the sinister foreign crab meat and mixed it in with domestic blue crab but labeled the blend as "Product of USA." Shockingly, it turns out that some of the foreign crab meat was "distressed" because it was at or beyond its "best-used-by" dates. Somewhat to his credit, Casey re-conditioned the distressed crab meat by re-pastuerization. Casey faces up to five years in prison and a fine of up to half the gross gain of the offense. Sentencing will be set for an All-You-Can-Eat-Crab day at the federal courthouse, and Casey has been ordered to bring two gallons of tartar sauce and seven dozen lemons to his allocution. The Court indicates it will supply wet-naps.

In a separate but somewhat related criminal matter, Roy Tuccillo Sr., and his son, Roy Tuccillo Jr., and their food processing and distribution companies Anchor Frozen Foods Inc., and Advanced Frozen Foods Inc. were indicted by a federal grand jury on four counts of Lacey Act violations. The United States Food and Drug Administration permits the sale of squid by that name or as "calamari;" however, octopus may only be sold as "octopus." Generally, octopus is more expensive than squid, which may explain why the Defendants allegedly imported, processed, marketed, sold, and distributed over 113,000 pounds of squid but sold that rubbery stuff as octopus. Although merely rumors and denied by the FDA, Sponge Bob purportedly served as a Confidential Informant in this matter.

Binary Options Fraud Cases Brought by CFTC and Department of Justice

In a Complaint filed in the United States District Court for the Eastern District of New York, the CFTC charged Yehuda L. Belsky and his firm Y Trading, LLC (Y Trading) with solicitation fraud in connection with binary options trading; and also charged Belsky with making false statements to the CFTC about his binary options trading and failing to register with the CFTC as a Commodity Trading Advisor.  Allegedly, Belsky solicited at least $1,258,000 from at least 14 customers to purportedly trade binary options on their behalf. The Complaint further alleges that Belsky violated a 2008 CFTC Order that had found he and his previously-owned, Innovative Capital Management, LLC (Innovative) committed a $1,250,000 fraud, furnished false documents to the National Futures Association, and misappropriated pool participants' funds.  Among other things, the 2008 CFTC Order imposed permanent trading bans on Belsky and Innovative, including a permanent prohibition from trading on any registered entities. In alleged violation of the 2008 CFTC Order, the 2018 CFTC Complaint alleges that Belsky acquired log-in credentials from at least three of his customers and surreptitiously traded their binary options accounts.

In an Indictment filed in the United States District Court for the Eastern District of New York, Yehuda Belsky a/k/a "Jay Bell" was dcharged with mail fraud, failure to register as a commodities trading advisor, and misappropriation of customer funds. Allegedly, Belsky stole  investors' money for his personal use and to repay other customers a la Ponzi who he had fraudulently induced to trust him with investment funds.  READ the FULL TEXT:
The CFTC filed an Order and simultaneously settled charges against Kooima & Kaemingk Commodities, Inc. (K&K), Lauren Kaemingk, and Bradley Kooima for Kaemingk's fraud, unauthorized trading, and making false or misleading statements to CME Group Inc.; for a former employee's fraud; unauthorized trading; and violation of CME position limits in live cattle futures contracts; and for K&K's, Kaemingk's, and Kooima's supervision failures. In addition to being subject to orders to Cease-and-Desist from further violations of the Commodity Exchange Act and CFTC regulations, K&K, Kaemingk, and Kooima will pay $11,920,857.05 restitution and a $1,250,000 civil monetary penalty of $1,250,000. The Order alleged that K&K fraudulently solicited customers, and that through two of its associated persons, a former employee and Kaemingk, defrauded customers by its unauthorized trading, which caused net customer losses of approximately $11.9 million. During the CME's investigation, through Kaemingk, K&K allegedly concealed the scope of the unauthorized trading at K&K, and Kaemingk made misleading statements during an interview and he encouraged a customer to withhold information. In imposing the monetary penalty, CFTC took into account the fine imposed by CME in its related action.  READ the FULL TEXT CFTC Order
In a Complaint filed in the United States District Court for the Southern District of New York, tghe SEC alleged that William C. Skelley violated antifraud provisions of the federal securities laws, including Section 17(a) of the Securities Act of 1933 (the "Securities Act") and Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 thereunder; and that Sohin S. Shah violated Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Exchange Act and Rules 10b-5(a) and (c) thereunder. Further, the complaint alleges that Skelley and Shah are each liable as a control person of iFunding, LLC and iFunding Holdings under Section 20(a) of the Exchange Act for the two entity's violations of Section 10(b) of the Exchange Act and Rule 10b-5(b) Co-founders and senior executives of iFunding LLC, Skelley and Shah allegedly raised over $3 million from 42 investors in 17 states via fraudulent claims about the company's plans to build an online real estate equity crowdfunding portal. Allegedly, Skelley and Shah diverted over $1 million of investor funds for their personal use. READ the FULL TEXT Complaint

SEC Charges Firm With Deficient Cybersecurity Procedures (SEC Release 2018-213)
In its enforcement action charging violations of the Identity Theft Red Flags Rule, the SEC charged Voya Financial Advisors Inc. ("VFA") with violating the Safeguards Rule and the Identity Theft Red Flags Rule. , which are designed to protect confidential customer information and protect customers from the risk of identity theft. Without admitting or denying the SEC's findings, VFA agreed to be Censured, to pay a $1 million penalty, and will retain an independent consultant to evaluate its compliance policies and procedures. The SEC alleged that over six days in 2016, cyber intruders impersonated VFA contractors by calling VFA's support line and requesting that the contractors' passwords be reset. Using new passwords, the intruders accessed personal information of 5,600 VFA customers, and thereafter created new online customer profiles and obtained unauthorized access to account documents for three customers.  READ the FULL TEXT Order
The CFTC filed and settled separate Orders against traders Adam Flavin and Peter Grady for their attempted manipulation of the price of certain Chicago Boart of Trade wheat futures and options contracts. Flavin and Grady's alleged strategy utilized the acquisition and loading-out for delivery wheat with 3 parts per million deoxynivalenol (3 ppm Vomitoxin) through the purchase and cancellation of 250 wheat shipping certificates by which they intended to send a signal to the market of a demand for 3 ppm Vomitoxin wheat in order to increase the value of certain wheat spread and options. Flavin's Order requires him to pay a $125,000 civil monetary penalty and Grady's Order requires him to pay a $250,000.  Further, Flavin's Order finds that for four years, and Grady's Order finds that for nine months, each is prohibited, from the date of their respective Orders, from: 1) entering into any transactions involving commodity interests; 2) having any commodity interests traded on his behalf; 3) controlling or directing the trading for or on behalf of any other person or entity in any account involving commodity interests; and 4) soliciting, receiving, or accepting any funds from any person for the purpose purchasing or selling any commodity interests.  The two Orders also require Flavin and Grady to cease and desist from further violations of the Commodity Exchange Act, as charged. In a related CME Group Inc matter, CME issued Notices of Disciplinary Action against Flavin and Grady ordering them to respectively pay fines of $125,000 and $250,000; and their access to all CME trading floors/platforms was suspended respectively for four years and nine months. READ the FULL TEXT:
Grady Order 
Flavin Order