Securities Industry Commentator by Bill Singer Esq

June 11, 2021

[S]ince 2012, the Slilpp marketplace has been selling stolen login credentials, including usernames and passwords for bank accounts, online payment accounts, mobile phone accounts, retailer accounts, and other online accounts. According to the affidavit, the Slilpp marketplace allowed vendors to sell, and customers to buy, stolen login credentials by providing the forum and payment mechanism for such transactions; Slilpp buyers subsequently used those login credentials to conduct unauthorized transactions (such as wire transfers) from the related accounts. To date, over a dozen individuals have been charged or arrested by U.S. law enforcement in connection with the Slilpp marketplace.

According to the affidavit, the FBI, working in coordination with foreign law enforcement partners, identified a series of servers that hosted the Slilpp marketplace infrastructure and its various domain names. Those servers and domain names were seized pursuant to domestic and international legal process.

. . .

At the time of the disruption, the affidavit alleges that stolen account login credentials for over 1,400 account providers were available for sale on the Slilpp marketplace. According to the affidavit, a fraction of the victimized account providers have calculated losses so far; based on limited existing victim reports, the stolen login credentials sold over Slilpp have been used to cause over $200 million in losses in the United States. The full impact of Slilpp is not yet known.
Viky Bohra, 37, pled guilty in the United States District Court for the Western District of Washington
to securities fraud, and he was sentenced to 26 months in prison. In September 2020, Bohra was charged by the SEC in a civil insider trading case; and he, his father, and his wife paid $2,652,899 in disgorgement, interest and penalties. As part of the plea agreement, Bohra's wife  (a former Amazon finance employee) will not face criminal charges. As alleged in part in the DOJ Release:

[B]ohra's wife had access to confidential information regarding Amazon revenue and expenses.  Because of that work, Bohra and his wife were subject to blackout periods during which no Amazon stock could be traded.  Bohra's wife was advised of insider trading policies making it clear the responsibility to safeguard confidential financial information.  Despite those warnings, Bohra obtained his wife's confidential information and traded in Amazon stock and options in accounts tied to him and his father.  Trades occurred during blackout periods and, from 2016 to 2018, relied in part on information from his wife to make successful trades in advance of Amazon earnings announcements., Vikas Singla was charged with 17 counts of intentional damage to a protected computer and one count of obtaining information by computer from a protected computer. As alleged in part in the DOJ Release:

[Singla] the chief operating officer of a metro-Atlanta network security company that served the health care industry, allegedly conducted a cyberattack on Gwinnett Medical Center that involved (i) disrupting phone service, (ii) obtaining information from a digitizing device, and (iii) disrupting network printer service. The indictment further alleges that the cyberattack was conducted, in part, for financial gain.

FINRA Fines and Suspends Rep for Private Securities Transaction
In the Matter of Peter Bruce Suyama, Respondent (FINRA AWC 2019064900501)
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, Peter Bruce Suyama submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Peter Bruce Suyama was first registered in 1985, and between April 2017 and November 2019 he was dually registered with LPL Financial LLC and with a registered investment advisor. In accordance with the terms of the AWC, FINRA imposed on Suyama a $5,000 fine and a 20-calendar-day suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC: 

In April 2019, while associated with LPL, Respondent purchased $50,000 of preferred shares of a bio-technology company, directly from the company. Suyama did not make the investment through LPL, and the transaction occurred outside the scope of his employment with the firm. Prior to making the investment in these securities, Suyama did not provide the firm with written notice regarding the investment or obtain the firm's approval to make the investment. In June 2019, Respondent also falsely attested on an LPL annual compliance questionnaire that he had not participated in any private securities transactions despite the fact that he had invested in shares in the bio-technology company. 

Therefore, Respondent violated FINRA Rules 3280 and 2010.
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, Scott S. Niekamp submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Scott S. Niekamp was first registered in 2000 with Northwestern Mutual Investment Servics, LLC ("NMIS"). In accordance with the terms of the AWC, FINRA imposed on Niekamp a $10,000 fine and a three-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:

From June 2011 to August 2017, NMLS's written supervisory procedures (WSPs) required registered representatives to disclose and receive approval for any outside business activity (or changes thereto) prior to participation or the effective date of any change. 

In May 2011. NMLS approved Niekamp's request to invest and participate in an outside business activity known as Commons Development Company (CDC), a developer of senior living facilities. Niekamp told NMIS that, as a passive investor, his activities would be limited to reviewing corporate documents, attending quarterly board meetings, and filing tax returns. In November 2014. Niekamp updated his outside business activity disclosures to reflect that he was no longer involved in CDC. 

However, from June 2011 to August 2017, Niekamp engaged in other outside business activities on behalf of CDC. For example, Niekamp reviewed and edited pitch materials for potential investors; hired and paid print vendors; contributed capital towards a possible real estate purchase; and met with individuals seeking to partner with CDC on future projects. Niekamp also engaged in negotiations for a possible land purchase through CDC's d/b/a, Urban Prairie Development. 

In 2011, Niekamp also received a 2% ownership interest in Keystone Technologies, LLC (Keystone). Keystone provides technology solutions for senior living facilities and partnered with CDC on several potential projects. Niekamp assisted Keystone in its attempts to secure financing by facilitating meetings with a local bank, and referenced Keystone and Urban Prairie Development in the signature block of the personal e-mail address he used to conduct his outside business activities. 

Niekamp did not disclose the additional outside business activities he conducted through CDC and Urban Prairie, or his membership interest and activities on behalf of Keystone, to NMIS until 2018. Niekamp also made false statements regarding his outside business activities on six compliance questionnaires. 

Therefore, Niekamp violated FINRA Rules 3270 and 2010.

. . .

In June 2015, Niekamp's firm customer and friend approached Niekamp about a possible loan to assist the customer in obtaining bank financing and coveting payroll taxes for his business. The discussions continued in July and, in September 2015, Niekamp and his wife loaned his firm customer $250,000 via a check drawn on their joint account. In May 2016, Niekamp and his wife loaned his firm customer another $200,000. 

Niekamp did not disclose or seek prior approval from NMIS for the loans. Niekamp also falsely stated on a compliance questionnaire that he had not loaned money to a firm customer. 

Therefore. Niekamp violated FINRA Rules 3240 and 2010.
In a recent FINRA OHO Decision, we have a former LPL rep who paid commissions to a former colleague. Sometimes that's okay. Not this time, or at least that's LPL's and FINRA's position. For reasons that are not disclosed, when confronted with FINRA's allegations of misconduct, the rep opted to have his day in court (or hearing) and offer explanations for his actions. I'm guessing that the settlement offer made by FINRA Staff was much higher than what the FINRA OHO Panel imposed. Not saying that's right. May not be. Just offering my best guess.
The Wall Street career of Gopi Krishna Vungarala is a smoldering train wreck. Without question, Vungarala and his family had their personal struggles, which makes this story more poignant and tragic. That backstory notwithstanding, it's hard to argue against FINRA's imposition on Vungarala of a Bar and the SEC's ratification of same; and it's equally difficult to dispute a FINRA arbitration panel's imposition of compensatory and punitive damages against him.
In a recent FINRA regulatory settlement, we got two friends, one of whom is a stock broker. The stockbroker may well have thought that he was doing his friend a favor by trading options. In fact, the friend may also have appreciated the gesture. That is until the friend/customer didn't quite appreciate the stockbroker's trading; and we're talking about lots of trading.
You're unhappy at your present employer. You negotiate a deal with another employer. Apparently you're really wonderful at what you do because you're offered a nice compensation package. Further, you did such a fabulous job selling yourself that your likely-new-employer requests a million bucks in liquidated damages in the event you don't start working for them by a mutually agreed-to date. So . . . like what could go wrong with all of that? Apparently, a lot because we got a 17-page FINRA Arbitration Award and decisions from two federal courts!