Securities Industry Commentator by Bill Singer Esq

August 21, 2019
Michael Pizarro a/k/a "Eric Miller" pled guilty in the United States District Court for the Southern District of New York to one count of wire fraud. As set forth in part in the DOJ Release:

Beginning in at least February 2017 through July 25, 2019, PIZARRO called the Victims, many of whom were more than 70 years old, and told them that his name was "Eric Miller" and he was calling on behalf of a company called "National Grants."  PIZARRO informed the Victims that they had been approved for a government grant, which was being held in escrow at an account with the "Word Bank" in Washington, D.C.  Before the funds could be released, however, the Victims would have to pay a registration fee.  In fact, none of the Victims had been approved for a grant, the grants did not exist, and no Victim ever received any funds.

In April 2018, PIZARRO was charged in New York Supreme Court in connection with his involvement with National Grants from October 2015 through January 2017.  PIZARRO pled guilty in December 2018 and was awaiting sentencing when he was arrested in connection with this scheme on May 2, 2019.  After he was released on bail, PIZARRO continued to seek contact information for additional Victims in furtherance of the scheme.  In total, not including the conduct charged in New York Supreme Court, PIZARRO defrauded the Victims out of approximately $270,000.

Victims of Pizarro's scheme should contact:
  • Wendy Olsen-Clancy, the Victim Witness Coordinator at the United States Attorney's Office for the Southern District of New York, at 866-874-8900, or
  • Detective Christopher Bastos at 917-480-7167 or

Collaboration, Expertise, Innovation and Responsibility: Introducing FINRA's Values (FINRA UNscripted)
As set forth under "Episode Summary":

What is corporate culture? How do you shape it? What's the role of organizational values? On this episode, we learn the answer to these questions and more as we walk through FINRA's recent introduction of four new organizational values. 

Bill Singer's Comment: Oh my god -- please, I'm begging FINRA: Stop! I've just lost 28 minutes of my life listening to fluff. How much more money and time will FINRA waste on its podcast drivel? There is nothing in this podcast that has anything to do with Wall Street regulation. There is nothing in this podcast that is even remotely useful or informative. It's yet another example of an organization with too much time and money on its hands and a grotesque lack of accountability. FINRA should make better use of its funds by paying a bonus to some of its investigators or regulatory lawyers. I mean, seriously, consider this nonsense under "Episode Notes":

To shape the FINRA of the future, this year FINRA introduced four new corporate values-collaboration, expertise, innovation and responsibility. On this episode of FINRA Unscripted, we learn why values matter, the challenges involved with introducing new organizational values and how FINRA hopes these new values will help drive the organization forward.

Speaking of cultures, does FINRA have a cultured corporate yogurt? Maybe FINRA can come up with four new corporate flavors rather than values? At no charge whatsoever to FINRA or its members, I have posted an informative video (that's like a podcast but with moving pictures) that will explain how to make homemade cultured yogurt. I only lost 2 minutes and 45 seconds of my life in the effort but came away with something to eat. FINRA Framboise anyone?
In a recent regulatory settlement, FINRA told Lime Brokerage to put the lime in the coconut and shake it all up. Well, okay, maybe that's not exactly correct. Perhaps FINRA told Lime to put its written supervisory procedures in a coconut and take the coconut and shove it up its . . . well, okay, that's not exactly right either. On the other hand, that last variation on the theme ain't all that wrong either.

Rambling Narrative of Random Events. Regina Morro, Plaintiff, v.SEC Finra International Investors, Defendant (Opinion, United States District Court for the District of Columbia, 19-2366)
I mean first I had to sit through FINRA's cultured yogurt thing and then I had to read a somewhat terse yet delightfully testy Opinion from the United States District Court for the District of Columbia ("DSDC"). For starters, the Defendant in this case is none other than the "SEC Finra International Investors," which is rumored to be at the "Secret Illuminati Wall Street Bankers Bilderberg Bildungsroman Society." That all-powerful-but-apparently-not-all-that-secret group was unmasked via a federal in forma pauperis Complaint, which DCDC deemed to have failed to "meet the minimal pleading requirements" under the Federal Rules of Civil Procedure. Picky. Picky. Picky. On top of that, DCDC pejoratively dismisses the case with this observation:

[T]he complaint, captioned "Whistleblowing," consists of a rambling narrative of random events. It contains no discernible allegations against the named defendant nor requests any relief. Most importantly, the basis of federal court jurisdiction is wholly unclear . . .
Christian Trunz, a former precious metals trader at the London, Singapore and New York offices of a U.S. bank (cleverly referenced in the DOJ Release as "Bank A"), pled guilty in the United States District Court for the Eastern District of New York to an Information charging him with one count of conspiracy to engage in spoofing and one count of spoofing. The DOJ Release informs us that after Trunz pled guilty he "resigned from his position as an Executive Director at Bank A earlier today." Wow, didn't see that coming. As set forth in part in the DOJ Release:

[B]etween approximately July 2007 and August 2016, Trunz placed thousands of orders that he did not intend to execute for gold, silver, platinum and palladium futures contracts traded on the New York Mercantile Exchange Inc. (NYMEX) and Commodity Exchange Inc. (COMEX), which are commodities exchanges operated by CME Group Inc.  Trunz learned to spoof from more senior traders, and spoofed with the knowledge and consent of his supervisors.

Bill Singer's Comment: The identity of "Bank A" will never be discovered. It is an impenetrable secret protected behind DOJ's fortress of impenetrability. Then again, if you enter the name "Christian Trunz" into FINRA's online BrokerCheck database, it turns out that there's only one "Christian Trunz" listed -- go figure! In any event, this one-and-only Christian Trunz was employed by JP Morgan Securities. Alas, it would be quite the wild goose Chase for me to even begin to figure out just who Bank A is. I would really need to go Chase after JP Morgan and I'd never bank on my chances of success of figuring out the financial institution where Trunz traded.
Without admitting or denying the findings in an SEC Order
2019/33-10673.pdf that it had violated the anti-touting provisions of Section 17(b) of the Securities Act, Russian entity ICO Rating agreed to cease and desist from committing or causing any future violations of these provisions, to pay disgorgement and prejudgment interest of $106,998, and a civil penalty of $162,000. As set forth in part in the SEC Release:

[B]etween December 2017 and July 2018, ICO Rating produced research reports and ratings of blockchain-based digital assets, including "tokens" or "coins" that were securities, and published this content on its website and on social media. ICO Rating billed itself as "a rating agency that issues independent analytical research," and stated that its mission is "to help the market achieve the necessary standards of quality, transparency and reliability." However, ICO Rating failed to disclose that it was paid by certain issuers whose ICO offerings it rated.

I am shocked! Shocked I say!! There are folks who are paying to have crypto touted? Omigod, how will we ever recover our faith in the financial system?
Without  admitting or denying the findings in an SEC Order
2019/34-86708.pdf,  TherapeuticsMD Inc. consented to an order to cease and desist from future violations of Regulation FD and Section 13(a) of the Securities Exchange Act; and the company agreed to pay a $200,000 penalty. As set forth in part in the SEC Release: 

The SEC's order finds that on two separate occasions in 2017, TherapeuticsMD selectively shared material information with analysts about the company's interactions with the U.S. Food and Drug Administration (FDA).  As detailed in the SEC's order, on June 15, 2017, one day after a publicly-announced meeting with the FDA about a new drug approval, TherapeuticsMD sent private messages to sell-side analysts describing the meeting as "very positive and productive."  TherapeuticsMD's stock price closed up 19.4 percent on heavy trading volume the next day.  At that time, the company had not issued a press release or made any other market-wide disclosure about the meeting.

According to the SEC's order, early in the morning of July 17, 2017, TherapeuticsMD issued a press release announcing that it had submitted additional information to the FDA, but did not yet have a clear path forward regarding its New Drug Application.  TherapeuticsMD's stock price declined approximately 16 percent in pre-market trading following the issuance of the press release.  The SEC's order finds that in a call and email to sell-side analysts after the press release was issued but before the market opened, the company selectively shared previously undisclosed details about the June FDA meeting and the information it had subsequently submitted to the FDA.  According to the SEC's order, all of the analysts published research notes containing these details, and the stock rebounded to close down only 6.6 percent for the day.  The SEC's order found that at the time of these selective disclosures, TherapeuticsMD did not have policies or procedures regarding compliance with Regulation FD.
Mantria Corporation co-founder Troy Wragg was sentenced in the United States District Court for the Eastern District of Pennsylvania to 22 years in prison; and he was ordered to pay $54 million restitution. As set forth in part in the DOJ Release:

[F]rom 2005 until 2009, Wragg received approximately $54 million in funds from investors across the United States with the false promise that they would earn 50% or higher returns on their investments.  The defendant told the victim investors that Mantria was a very successful company with investments in real estate and green energy.  In reality, however, Mantria was a Ponzi scheme which used new investor funds to pay "earnings" to earlier investors.

Wragg obtained these large investments through co-defendant Wayde McKelvy, who ran unlicensed investment clubs in Colorado.  In addition to advising the victims to invest their retirement savings in Mantria, Wragg and McKelvy coached the victims to obtain home equity loans, credit card loans, and other loans to raise even more funds to invest in Mantria.  Thus, when the Mantria Ponzi scheme collapsed, many of the victims were left financially devastated.

While on bail pending sentencing for the Mantria fraud, Wragg brazenly committed a second fraud scheme.  The defendant solicited an investment in an online video dating service, known as LUVR, with the false representation that the company was about to be purchased by a well-known internet entrepreneur.  In reality, no such deal ever existed and the victim lost her entire investment.

Wragg pleaded guilty to both fraud schemes.  Co-defendant Amanda Knorr also pleaded guilty to her role in the Mantria fraud and was sentenced in April 2019 to 30 months' in prison.  Co-defendant Wayde McKelvy was convicted on all counts at trial in October 2018.  The Court has not yet set a sentencing date for McKelvy. 
Former Wellness Center USA, Inc. Chief Executive Officer/President/Chairman Andrew J. Kandalepas plead guilty in the United States District Court for the Northern District of Illinois to one count of securities fraud for engaging in a market manipulation scheme to artificially inflate the company's stock price, and he is awaiting sentencing. Separately, in Complaint filed in the United States District Court for the Northern District of Illinois
2019/comp24572.pdf, the SEC charged Kandalepas with making false and misleading statements in Wellness's SEC filings and press releases and with manipulating the company's stock. A final judgment entered by the Court orders Kandalepas to pay $593,363 in disgorgement, prejudgment interest of $113,554, and a civil penalty of $160,000; and he is subject to a consent judgment imposing injunctive relief and barring him from serving as an officer or director of a public company and from participating in penny stock offerings. As set forth in part in the SEC Release:

[K]andalepas took over $450,000 in unauthorized withdrawals from the company and then concealed his actions by causing Wellness to mischaracterize his withdrawals as salary, prepayments, or loans in false and misleading Forms 10-K and 10-Q. The complaint also alleged that Kandalepas caused the company to issue false and misleading press releases announcing non-existent sales of medical devices by the company. As detailed in the complaint, Kandalepas manipulated the market for Wellness stock through secret trading in a friend's brokerage account that generated over $136,000 in proceeds, which Kandalepas misappropriated. The SEC further alleged that Kandalepas coordinated manipulative trading of Wellness stock with Wellness's consultant and hired the consultant to solicit investments in Wellness as an unregistered broker.