Securities Industry Commentator by Bill Singer Esq

January 6, 2020

featured in today's Securities Industry Commentator:

Former UVA Football Player Sentenced for $10 Million Fraud (DOJ Release)

Longfin CEO Settles Fraud Action (SEC Release)
Former University of Virginia football player Merrill Robertson Jr. was convicted in the United States District Court for the Eastern District of Virginia Robertson was convicted of conspiracy, mail fraud, wire fraud, bank fraud, and money laundering; and he was sentenced to 40 years in prison. As set forth in part in the DOJ Release:

[M]errill Robertson Jr., 39, of Chesterfield, started Cavalier Union Investments, LLC, and Black Bull Wealth Management, LLC, with co-conspirator Sherman Carl Vaughn. From 2008-2016, Robertson and Vaughn solicited individuals to invest money in private investment funds that they managed, as well as distinct investment opportunities that they proposed. Robertson identified potential investors through various contacts; including contacts he developed playing football at Fork Union Military Academy, the University of Virginia, and in the National Football League, while Vaughn focused on developing investment opportunities.

Among other things, Robertson led investors to believe he was an experienced investment advisor, that his company was qualified to serve as a custodian of retirement accounts, that investor money was deposited into individual tax-deferred retirement accounts, and that investor money was secured by tangible cash-producing assets owned by his company.

As a result of this conspiracy, Robertson and Vaughn fraudulently obtained more than $10 million from over 60 investors, spending much of the money on their own personal living expenses, including mortgage and car payments, school tuitions, spa visits, restaurants, department stores, and vacations.

By 2015, Robertson and his partner had spent most of the money they collected from investors. Robertson was then unable to raise new investor capital. So Robertson approached Cavalier investors and other friends and offered to help them get loans in exchange for a portion of the loan proceeds. Mr. Robertson and others then caused falsified loan applications to be submitted to various banks and credit unions on behalf of these individuals, which included false statements about the borrower's personal financial status, the real purpose of the loan, and whether the loan was secured by collateral. In doing so, Robertson and others obtained nearly $250,000 through falsified loan applications to at least 5 financial institutions.

Longfin CEO Settles Fraud Action (SEC Release)
Longfin Corp. CEO Venkata S. Meenavalli agreed settle an SEC Complaint that had that Longfin and Meenavalli obtained qualification for a Regulation A+ offering by falsely representing in public filings that the company was managed and operated in the U.S.  Allegedly, Longfin and Meenavalli distributed over 400,000 Longfin shares to Meenavalli's affiliates, and misrepresented the offering to Nasdaq in order to meet its listing requirements -- over 90% of the firm's 2017 reported revenue was allegedly the result of sham commodities transactions. As alleged in part in the SEC Release, Meenavalli's settlement will require him to:

disgorge $159,000 (his full salary received while acting as Longfin's CEO) plus prejudgment interest of $9,000, and to pay a $232,000 civil penalty.  It would also require Meenavalli to surrender all of his Longfin stock, permanently bar him from acting as an officer or director of a public company, and enjoin him from participating in the offer or sale of penny stocks.  Meenavalli has agreed to settle the charges without admitting or denying the SEC's allegations.  The SEC previously obtained a default judgment against Longfin that ordered nearly $6.8 million in monetary relief.  A parallel criminal action against Meenavalli, filed by the U.S. Attorney's Office for the District of New Jersey, remains ongoing.

The SEC filed a separate action alleging that Longfin, Meenavalli, and three affiliated individuals illegally distributed and sold more than $33 million of Longfin stock in unregistered transactions.  In June 2019, the court ordered over $26 million in disgorgement and penalties against the three affiliates, and in August entered default judgments ordering civil penalties of $284,139 and $28,416 against Longfin and Meenavalli, respectively.
Our publisher Bill Singer loves to spin a good yarn. Some say Bill is one of Wall Street's great raconteurs. Some say he's just a loud-mouth pain in the ass. Frankly, there are those who say he's all of that, but, you know, to each his own, right? In today's blog, Bill regales us with yet another oddball tale from the annals of FINRA's arbitration forum. This time we are asked to consider a dispute involving seven promissory notes amounting to just shy of $800,000. On the Street, they don't give out such big bucks to deadbeats, so the recipient was likely among UBS's top producers. And if the Respondent in today's featured arbitration was sharp enough to earn the underlying loans, then he's probably going to do everything he can to fight his former employer's effort to obtain repayment. Sadly, as much as Bill would love to add his own color to this story, the arbitrators and a federal judge did such a great job penning their decisions that there's not much left for him to do. On the other hand, Bill did add some fun music videos from Jackson Browne, Humble Pie, and the Thompson Twins. Now that's quite the amalgamation!
As reported by Oisin Breen, Plaintiff BlackCrown alleged that the pending Schwab-TD merger will potentially cripple smaller RIAs that rely heavily on the support of their custodians. In filing its federal suit, the Plaintiff RIA argued that a remedy for the anticipated anti-competitive damages would be to require the sale of TD Ameritrade Institutuional to BlackCrown.