February 5, 2019
NEWPORT NEWS, Va. - A Hampton woman pleaded guilty today to aggravated identity theft for stealing over $21,000 from an elderly client. In-home care provider Sandra Payne pled guilty in the United States District Court for the Eastern District of Virginia to aggravated identity theft arising from her misuse of an elderly client's family's credit/debit card account numbers. Using that data without the knowledge or consent of the owners, Payne purchased goods and services in excess of $21,000.
In today's featured public customer FINRA Arbitration, the public customer Claimant named 10, count 'em, 10 respondents but after some 6 respondents were removed from the case, well, the case looked like an abandoned car wreck on the side of the road. Most of the useful parts got stripped. No one came to claim it. And so it just sat there and rusted away.
Nigerian citizens Olayinka Olaniyi and Damilola Soloman Ibiwoye were arrested and extradited from Malaysia to the United States in order to face charges of conspiracy to commit wire fraud, computer fraud, and aggravated identity theft after hacking into American university computer systems and stealing paychecks and tax returns. Ibiwoye pled guilty and was sentenced to 39 months in prison. Olaniyi was convicted by a federal jury and is spending nearly six years in jail.
In an Indictment filed in the United States District Court for the Western District of Michigan, Oghenevwakpo Igboba was accused of using hundreds of individuals' personally identifying information to access an Internal Revenue Service website, from which he took sensitive tax and personal information. Using the purloined information, Igboba filed false Form 1040s, and, thereafter, directed hundreds of thousands of dollars to himself. Although IRS systems stopped many of the returns, Igboba personally received at least $57,000. A jury found Igboba guilty of one count of conspiracy to defraud the United States, one count of wire fraud, eight counts of making a false claim to the United States, and eight counts of aggravated identity theft. Igboba was sentenced to 162 months in prison plus three years' supervised release; and ordered to pay $514,823 in restitution, a $48,205 money judgement, and $1,800 in court assessments.
In an Indictment filed in the United States District Court for the Northern District of California, Ahmad Wagaafe Hared and Matthew Gene Ditman were charged with conspiracy to commit computer fraud and abuse, conspiracy to commit access device fraud, extortion, and aggravated identity theft. As set forth in part in the DOJ Release:
[H]ared, Ditman, and their co-conspirators used fraud, deception, and social engineering techniques to induce representatives of cellphone service providers to provide information about the SIM cards of the conspirators' victims. A SIM card-short for Subscriber Identity Module or Subscriber Identification Module-is a technology used to identify and authenticate subscribers on mobile phone devices. The conspirators allegedly convinced the representatives of cellphone service providers to transfer or port cellphone numbers from SIM cards in the devices possessed by victims to SIM cards in devices possessed by the conspirators, a practice known as SIM swapping. The indictment further alleges that after Hared, Ditman, and others gained control of victims' cellphone numbers, they used additional deceptive techniques to gain access to email, electronic storage, and other accounts of victims and ultimately to cryptocurrency accounts of victims. Hared, Ditman, and their co-conspirators also extorted victims of the SIM swapping scheme.
In response to a Complaint and Indictment filed in the United States District Court for the Southern District of New York, Marcos Elias pled guilty one count each of conspiracy to commit wire fraud and aggravated identity theft. The charges arose in connection with Elias' role in fraudulently obtaining over $750,000 at financial institutions using false representations and the stolen identities of Brazilian account holders at those institutions. As set forth in part in the DOJ Release:
Since at least 2012, a Brazilian company (the "Client") held an account at a financial institution headquartered in Manhattan (the "Firm"). Beginning in or about June 2014, ELIAS was in correspondence with a Senior Vice President at the Firm (the "Firm Employee") regarding the Client's account. The Firm Employee then began receiving emails purportedly from an employee of the Client (the "Client Employee") instructing the Firm Employee to transfer the Client's money to a bank account in Luxembourg (the "Luxembourg Account") that appeared to be in the name of the Client. Those emails were later determined to have been sent from an email address created the same day that was never used by the Client Employee and contained bogus wire instructions with the forged signature of the Client Employee. As a result of the false documentation provided to the Firm Employee, on July 15, 2014, the Firm transferred approximately $752,000 from the Client's account at the Firm to the Luxembourg Account (the "Fraudulent Transfer"), believing it to be a legitimate transfer requested by the Client.
In actuality, the Client did not authorize the Fraudulent Transfer, did not have any bank or brokerage accounts in Luxembourg, and did not send the emails to the Firm Employee requesting the transfer. Instead, the Luxembourg Account that received the Fraudulent Transfer was beneficially owned by ELIAS and opened in the name of a company formed in Panama the week prior to the Fraudulent Transfer. The Luxembourg Account was held in the name of a company containing the name of the Client in order to create the false impression that the Client's funds were being transferred to an account beneficially owned by the Client when in fact such account was beneficially owned by ELIAS. . . .
In a Complaint filed in the United States District Court for the Northern District of Georgia, the SEC alleged that Thomas Conrad, Jr. and two unregistered advisory firms he controlled, Financial Management Corporation ("FMC") and Financial Management Corporation, S.R.L. ("FMC Uruguay") directed preferential redemptions and other disbursements from funds advised by FMC and FMC Uruguay for himself, his extended family, and certain favored investors, while representing to other investors that redemptions were suspended. Further, the Complaint alleged that Conrad failed to disclose conflicts of interest arising from loans made to Conrad's family members and Conrad's appointment of himself as a sub-manager for a fee. Also, the Complaint alleged that in offering materials given to prospective investors, defendants touted Conrad's significant experience in the securities industry, but failed to disclose his disciplinary history. The Court granted summary judgment on the fraud claims based on the fraudulent redemption practices and failure to disclose Conrad's disciplinary history. The Court found that Conrad, FMC, and FMC Uruguay repeatedly made material misrepresentations; however, the Court denied the SEC's motion for summary judgment on its claims that Conrad failed to disclose conflicts of interest, finding that there were disputed issues of facts. Finally, the Complaint alleged that Conrad failed to disclose to investors that he titled certain fund assets in his name, rather than the fund's name, and that Conrad, FMC, and FMC Uruguay falsely represented the historical performance of the funds and that the funds were being audited. The Court has yet to adjudicate these latter claims.
FINRA Fines and Suspends Rep for Discretionary Trading
In the Matter of Christopher Duke Bennett, Respondent (AWC 2017054060301, February 1, 2019).
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, Christopher Duke Bennett submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In accordance with the terms of the AWC, FINRA imposed upon Bennett a $5,000 fine and a 15-business-day suspension from association with any FINRA member firm in any capacity. As set forth in part in the AWC:
Between January 2014 and December 2015, Bennett exercised discretion in the
accounts of four customers, one of whom was a senior investor, by placing
approximately 75 total trades in those accounts. Bennett did not obtain express
authorization from those customers for those trades prior to placing them, did not
have written authorization from the customers to exercise discretionary authority
in those accounts, and neither sought nor obtained from Hilliard Lyons prior
written acceptance of the accounts as discretionary.
By virtue of the foregoing, Bennett violated NASD Rule 2510(b) and FINRA
In the Matter of Joseph Vitale (Initial Decision of Default; Init. Dec. Rel. No. 1345; Admin. Proc. File No. 3-18252 / February 4, 2019)
As set forth in the Decision's "Summary":
While helping to raise nearly $5 million for a purported investment, Respondent Joseph Vitale told investors that he received no commissions, when in fact roughly a third of their funds were siphoned to his personal benefit. This initial decision bars Vitale from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in an offering of penny stock.
In the Matter of the Arbitration Between Mark Crider Callahan, Claimant, v. Merrill Lynch Pierce Fenner & Smith Inc., Respondent (FINRA Arbitration Decision 18-02364 / February 1, 2019)
In a FINRA Arbitration Statement of Claim filed in June 2018, associated person Claimant Callahan sought the expungement of a customer complaint from his Central Registration Depository record ("CRD"). Respondent Merrill Lynch took no position as to the requested relief but participated in the hearing. Although notified, the customer did not appear. In recommending expungement, the sole FINRA Arbitrator made a FINRA Rule 2080 finding that the customer's claim, allegation, or information is factually impossible and clearly erroneous, and false; and that Claimant was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds. The FINRA Arbitrator offered the following rationale:
Claimant was not involved in the alleged deposit of the Customer's check into a personal account. The Arbitrator noted that Claimant's Exhibits 3, 4 and 5 conclusively demonstrated that Claimant did not deposit the check into a personal account. Exhibit 5 contains a letter signed by the Customer, which includes the statements, "This was a clerical error involving the cashier and home office personnel, [Respondent] placed the incorrect account number on my account" and Claimant "did not misdirect or misappropriate these funds."
During the expungement hearing, Claimant provided testimony, which described in detail, the internal control procedures with respect to receiving customer deposits at Respondent's office, where he was employed. Claimant testified that, at no time did he have access to incoming deposits from customers. In addition, Claimant did not have supervisory control over the employees responsible for the
receipt of incoming deposits.