April 1, 2019
FinTech Global Markets, Inc. ("FTGM") (whose majority shareholder is Boustead & Company Limited) has acquired Sutter Securities Incorporated ("Sutter"). The companies will provide a wide range of investment banking services that include IPOs, M&A, Reg D, Reg A+, securities trading, clearing and custody, mutual fund sales, and while not currently active, support the operation of an alternative trading system to facilitate transactions in securities that are not publicly-traded. Bob Muh, a Co-Founder of Sutter Securities and FINRA Governor on FINRA's Board, will continue to serve as a Sutter executive and joins FTGMs' Board of Directors.
In a Complaint filed in the United States District Court for the Central District of California, Motty Mizrahi and Sassi Mizrahi were charged with wire fraud. In a related action, the SEC filed a civil fraud action against Motty Mizrahi and MBIG Company and obtained emergency relief including a temporary restraining order and an asset freeze order against the defendants. As set forth in part in the DOJ Release:
[M]otty Mizrahi falsely portrayed himself as a licensed broker, certified public accountant, and experienced trader who employed sophisticated financial option- and insurance-hedging strategies through the brothers' business, MBIG Company. The Mizrahi brothers operated MBIG out of their parents' home in Encino, court documents state. From November 2012 until March 2019, Motty Mizrahi raised millions of dollars from investors, promised them "guaranteed" returns between 2 percent and 3 percent per month, and assured them that their funds could be withdrawn after an initial holding period on an on-demand basis. Motty Mizrahi allegedly submitted phony monthly account statements that purported to show consistent monthly gains and also falsely showed that MBIG's account balances were between $6 million and $9 million. However, Motty Mizrahi instead lost the investors' money - losses he and Sassi Mizrahi denied when confronted by victims who unsuccessfully demanded their money back, the affidavit states.
The complaint also alleges that Motty Mizrahi distributed to investors a financial prospectus that contained false and fraudulent representations concerning MBIG's past investment performance. The Mizrahi brothers also allegedly misled investors about their company's E*Trade brokerage account, which was supposed to be used for investors' money but in reality did not exist. Instead, Motty Mizrahi routed all victim-investor funds into his own personal trading account, the affidavit states. After E*Trade closed Motty Mizrahi's personal accounts, Motty and Sassi Mizrahi allegedly continued to mislead investors by assuring them that MBIG had an E*Trade account containing adequate balances to cover the victim-investors' initial investments.
In today's featured FINRA public-customer arbitration, we got allegations by a husband against an ex-wife, which, you know, sort of means that he's an ex-husband, but, for reasons that I don't quite understand, only the wife is referenced in the FINRA Arbitration Decision as an "ex." Be that as it may, the Claimant husband -- ex-husband -- sued his brokerage firm and stockbroker alleging that they were somehow involved with the alleged looting of the couple's joint accounts. Ah yes, the old he-said-she-said-she-looted.
Aleksandr Musienko, a/k/a "Oleksandr Serhiyovych Musiyenko," a/k/a "Robert Davis," and a/k/a "Ply," a Ukrainian national, was charged in a recently unsealed indictment with one count of wire fraud, one count of bank fraud, one count of money laundering conspiracy and two counts of money laundering. Musienko had been traveling in South Korea, when, at the U.S. government's request, South Korean officials arrested him and thereafter extradited him on the charges out of the United States District Court for the Western District of North Carolina. In what seems like the plot for a Hollywood thriller, the DOJ Release asserts in part that:
[M]usienko allegedly partnered with overseas cybercriminals who had hacked into, and stole funds from, online bank accounts belonging to a large number of individual and corporate victims in the United States. One victim was a business based in the Western District of North Carolina. Musienko operated a network of "money mules" throughout the United States. According to the indictment, using aliases that included "Robert Davis" and phony front companies that included "Vita Finance AG" and "Hilpert AG," Musienko recruited money mules throughout the United States using a variety of fraudulent techniques, including by advertising bogus "employment" opportunities to work as "Financial Assistants." He promised to pay the money mules a fee of approximately five percent for each overseas wire transfer they completed.
Once Musienko had his network of money mules in place, Musienko then offered his money mule services to his cybercriminal partners to assist them in transferring stolen funds. He directed his "money mules" to use their own bank accounts to receive and then transfer proceeds from the compromised bank accounts overseas. As alleged in the indictment, Musienko's criminal money mule operation effectuated the theft and laundering of at least $2.8 million from 2009 to 2012.
In resolving parallel SEC and DOJ investigations related to its violations of the Foreign Corrupt Practices Act ("FCPA"), Fresenius Medical Care AG & Co KGaA ("FMC") agreed to pay $147 million in disgorgement and interest to the SEC, and an $84.7 million criminal fine as part of a DOJ non-prosecution agreement. Additionally, FMC must retain an independent compliance monitor for two years and self-report its FCPA compliance efforts for the year after the monitor expires. The SEC Order https://www.sec.gov/litigation/admin/2019/34-85468.pdf found that FMC made improper payments through a variety of schemes, including using sham consulting contracts, falsifying documents, and funneling bribes through a system of third party intermediaries. Despite known red flags of corruption since the early 2000s, FMC devoted insufficient resources to compliance, which, in some jurisdictions, included the company failing to provide anti-corruption training or performing due diligence on its agents. In many instances, senior management actively engaged in corruption schemes and directed employees to destroy records of the misconduct. FMC paid about $30 million in bribes to government officials and others to procure business.
Jeremy Millul pled guilty in the United States District Court for the Southern District of New York to one count of conspiracy to commit securities fraud in connection with his role in a scheme to trade on material, nonpublic information in advance of the Sherwin-Williams Company's acquisition of the Valspar Corporation. Defendant Pinto-Thommaz was a credit rating analyst assigned to work on a Rating Evaluation Service for Sherwin-Williams Company. That assignment gave Pinto-Thomaz access to inside information about Sherwin-Williams acquisition of Valspar. Allegedly, Pinto-Thomaz passed inside information about the acquisition to Oujaddou, a hairstylist and salon owner, and Millul, a jeweler -- both defendants allegedly had close relationships with Pinto-Thomaz. Allegedly, Oujaddou sold his Valspar shares for approximately $192,080 in profits. Although Millul never owned a U.S. brokerage account and had never traded in U.S. securities prior to March 2016, he opened a brokerage account on March 13, 2016, and shortly thereafter purchased 480 shares of Valspar common stock. Also, on March 18, 2016, the last trading day before the acquisition was publicly announced, Millul also purchased 75 out-of-the-money Valspar call options. After selling his shares and options, Millul realized $106,806 in profits.
Pro Se Associated Person Wins Damages and Expungement in FINRA Arbitration In the Matter of the Arbitration Between Todd Gary Schwendiman, Claimant, v. Alternative Asset Investment Management Securities, LLC, Respondent (FINRA Arbitration Decision 17-00441)
In a FINRA Arbitration Statement of Claim filed in February 2017 and as amended, associated person Claimant Schwendiman representing himself pro se asserted breach of contract for failure to pay previously invoiced fees and expenses; failure to provide revenue information; failure to pay additional fees due; failure to provide joint property; and defamatory, misleading, inaccurate information on Form U5. Ultimately, Claimant sought $144,604.01 in compensatory damages plus
specific performance; expungement of his Form U5; interest; costs; reimbursement of $600.00 filing fee; and attorneys' fees. Respondent Alternative Asset Investment Management Securities requested the dismissal of all claims. The FINRA Panel of Arbitrators found Respondent liable and ordered it to pay to Claimant $144,604.01 in compensatory damages. Further, the Panel recommended expungement of Claimant's Central Registration Depository records and Form U5 based upon findings of defamation. The Panel recommended that Claimant's records be revised to disclose that the"Reason for Termination" was "Voluntary."