Securities Industry Commentator by Bill Singer Esq

June 24, 2021




         
FINRA Alerts Firms to Phishing Email From "FINRA Support" from the Domain Name "westour.org" (FINRA Regulatory Notice 21-22)
https://www.finra.org/sites/default/files/2021-06/Regulatory-Notice-21-22.pdf
It was is becoming something of a recurring nightmare, FINRA advises in part that:

FINRA warns member firms of an ongoing phishing campaign that involves fraudulent emails (see sample in Appendix) purporting to be from "FINRA SUPPORT" with the email address "support@westour.org". The email asks the recipient to pay attention "to the report attached below that requires your immediate response" and states that "[t]he attachment contains our updated Public Policy information." The emails may not include an attachment. 
FINRA recommends that anyone who clicked on any link or image in the email immediately notify the appropriate individuals in their firm of the incident. 

The domain of "westour.org" is not connected to FINRA and firms should delete all emails originating from this domain name. 

FINRA reminds firms to verify the legitimacy of any suspicious email prior to responding to it, opening any attachments or clicking on any embedded links. 

FINRA has requested that the Internet domain registrar suspend services for "westour.org".

Former Chief Operating Officer of Philadelphia Technology Start-Up Charged with Securities Fraud and Embezzlement (DOJ Release)
https://www.justice.gov/usao-nj/pr/former-chief-operating-officer-philadelphia-technology-start-charged-securities-fraud-and
-and-
https://www.sec.gov/litigation/litreleases/2021/lr25120.htm

In an Indictment filed in the United States District Court for the District of New Jersey
https://www.justice.gov/usao-nj/press-release/file/1405691/download,  Joesph Geromini was charged with 10 counts of wire fraud and two counts of securities fraud. As alleged in part in the DOJ Release:

Geromini was the chief operating officer (COO) for a technology startup headquartered in Philadelphia, Pennsylvania, which specialized in the development of point-of-care diagnostic testing of various diseases. Geromini controlled the company's bank and debit card accounts, and was responsible for soliciting investments in the company through debt and equity fundraising.

From July 2018 through October 2018, the company raised approximately $2.25 million of investor funds. Geromini misrepresented to investors that he would invest their funds to pursue the company's business plan, for example, by using the funds to further develop and commercialize its products and services, for lab expenses, and to pay employee salaries. Instead, Geromini diverted significant portions of their funds out of the company's bank account for purposes inconsistent with its business operations, including to pay himself hundreds of thousands of dollars through unauthorized wire transfers, ATM cash withdrawals, and debit card transactions.

Geromini frequently misrepresented to the company that the unauthorized wire transfers were intended to compensate him for his employment. Geromini told the company's chief executive officer that Geromini had twice secured contracts on behalf of the company with third parties and was, pursuant to his employment agreement, entitled to separate bonus payments. 

https://www.sec.gov/litigation/complaints/2021/comp25120.pdf, the SEC charged Geromini with violating the antifraud provisions of Section 17(a) of the Securities Act, as well as Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Without admitting or denying the allegations, Geromini agreed to settle the charges against him. As alleged in part in the SEC Release alleges taht Geromini:

lied to investors and stole over $200,000 raised during two 2018 securities offerings. According to the complaint, Geromini disseminated offering documents and financial models to investors that he knew were false and misleading because they did not account for his ongoing theft of investor proceeds. In addition, Geromini allegedly made materially false and misleading statements and omissions during communications with investors about the company's cash burn rate and use of proceeds. For example, the complaint alleges that Geromini falsely told investors that "every penny" of their money would be used in a meaningful, productive manner, when, in reality, he used funds raised during the offerings for personal expenses, including a car, an acquaintance's cosmetic surgery, a vacation, and other entertainment.

https://www.justice.gov/usao-nj/pr/ceo-limited-liability-company-sentenced-30-months-prison-wire-fraud
Kark James, %0, pled guilty in the United States District Court for the District of New Jersey to an Information charging him with one count of wire fraud, and he was sentenced to 30 months in prison plus three years of supervised release and ordered to pay $1.35 in restitution. As alleged in part in the DOJ Release:

James was the CEO of Gore Capital LLC, which he told others was a private equity investment firm. In February 2016, James and the victim agreed to each invest approximately $1.5 million into a company that specialized in extracting and converting cannabinoids from marijuana. They further agreed to form an LCC as a conduit for their joint investment. In April 2016, James incorporated the LLC in Delaware.

On April 20, 2016, James instructed the victim to wire his investment funds into a bank account. James falsely told the victim that the victim also had access to the account. On April 22, 2016, the victim wired $500,000 into the account. On July 12, 2016, James instructed the victim to wire the remaining $1 million of his investment, which the victim did. To induce the victim's payment, James told the victim that he would deposit his own money into the account. In reality, James never wired or deposited any of his own funds.

James later spent $1.35 million of the victim's funds on personal and entertainment expenses for himself.

https://www.sec.gov/litigation/litreleases/2021/lr25121.htm
In response to a Complaint filed in the United States District Court for the Eastern District of New York https://www.sec.gov/litigation/complaints/2021/comp25121.pdf, the SEC obtained a Final Judgment https://www.sec.gov/litigation/litreleases/2021/judgment25121.pdf against Asante Berko. As alleged in part in the SEC Release:

[O]n April 13, 2020, Asante Berko, a former executive of a foreign-based subsidiary of a U.S. bank holding company, arranged for his firm's client, a Turkish energy company, to funnel at least $2.5 million to a Ghana-based intermediary to pay illicit bribes to Ghanaian government officials in order to gain their approval of an electrical power plant project. The complaint further alleges that Berko helped the intermediary pay more than $200,000 in bribes to various other government officials, and that Berko personally paid more than $60,000 to members of the Ghanaian parliament and other government officials. According to the complaint, Berko took deliberate measures to prevent his employer from detecting his bribery scheme, including misleading his employer's compliance personnel about the true role and purpose of the intermediary company.

Berko consented to the entry of a final judgment that permanently enjoins him from violating the anti-bribery provision of the FCPA, Section 30A of Securities Exchange Act of 1934, and orders him to disgorge $275,000 in ill-gotten gains plus $54,163.92 in prejudgment interest.

https://www.supremecourt.gov/opinions/20pdf/19-422_k537.pdf
Because the Federal Housing Finance Agency (FHFA) did not exceed its authority under the Housing and Economic Recovery Act of 2008 as a conservator of Fannie Mae and Freddie Mac, the anti-injunction provisions of the Recovery Act bar the statutory claim brought by shareholders of those entities; the Recovery Act's structure, which restricts the President's power to remove the FHFA Director, violates the separation of powers.

https://www.cftc.gov/PressRoom/PressReleases/8399-21
The United States District Court for the Southern District of Texas entered a restraining Order
https://www.cftc.gov/media/6126/enfztegritycomplaint060921/download freezing the assets and requiring the preservation of documents against Troy Mason and his company ZTegrity, Inc. The Defendants were charged by the CFTC with fraudulent solicitation and failing to register. 
As alleged in part in the CFTC Release:

The complaint alleges that from at least October 2019 to the present the defendants used various websites and social-media platforms to fraudulently market their forex trading pool as a version of a savings account that offered a greater yield with similarly low or no risk. The defendants called this forex trading pool "The Black Club" and "The Forex Savings Club," which their website claimed had received over $460,000 from 411 participants.

The complaint further alleges the defendants induced participation in their forex trading pool by falsely claiming to "guarantee" to repay participants the funds they contributed to their individual "Forex Savings Accounts" and falsely offered participants "with a 100% certainty" portions of the "substantial profit[s]" to be generated using participants' pooled funds to trade forex. Rather, as alleged in the complaint, the defendants knew or recklessly failed to appreciate that no forex trader can guarantee profitable trading, or the avoidance of losses required to guarantee all participants' contributions, and knew, but failed to inform participants that they had no U.S.-based forex trading accounts.  

https://www.finra.org/sites/default/files/fda_documents/2020065370301
%20Arieh%20Israel%20CRD%206481347%20AWC%20va.pdf
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, Arieh Israel submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Arieh Israel was first registered from October 2016 to March 2020 with NYLife Securities, LLC and was dually employed by the firm's insurance affiliate. In accordance with the terms of the AWC, FINRA found that Arieh Israel violated FINRA Rule 2010 and imposed upon him a Bar from associating with any FINRA member in all capacities.  As alleged in part in the FINRA AWC:

On June 22, 2019, Customer A, an insurance customer, gave Israel a blank, signed check intended to be used to pay a policy premium. Israel instead made the check payable to himself, filled in the dollar amount of $3,229, and deposited the check into his own personal checking account. He did not submit the funds for Customer A's premium payment and instead used Customer A's money to pay for his own personal expenses. Customer A did not give Israel permission or authorization to use funds for personal use. Israel did not repay any of the funds to Customer A.

https://www.finra.org/sites/default/files/fda_documents/2020065370301
%20Arieh%20Israel%20CRD%206481347%20AWC%20va.pdf
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, Danielle Matson submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Danielle Matson was first registered in 2001, and in June 2006, she was registered with RBC Capital Markets, LLC  (but primarily employed as a "sales assistant"). In accordance with the terms of the AWC, FINRA found that Danielle Matson violated FINRA Rules 4511 and 2010 and imposed upon her a $2,500 fine and a 21-calendar-day suspension from associating with any FINRA member in all capacities.  As alleged in part in the FINRA AWC:

During Respondent's employment at RBC, the firm maintained its customer information within a dedicated system. Firm personnel, including registered representatives and sales assistants entered information into the system upon the opening of new accounts, and when customers wished to change or update information such as addresses. The information entered became a part of the customer's information and the firm's books and records. 

Respondent was authorized to enter information into this customer account system. Between August 2017 and April 2019, following the firm's upgrade of the system adding required fields for customer liabilities and trusted contact, on 16 occasions when updating a customer account profile, Respondent falsely entered "Less than $50,000" for the customer's liabilities and on 16 other occasions, she falsely entered "None or none available" for the customer's trusted contact. These 32 entries were false, in that they did not represent the customers' liabilities or trusted contacts, and each of the entries became part of the customers' account record in the firm's books and records. No customer losses resulted from these entries.

(BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/5917/susan-antilla-racism/
The thing about Glenn Capel's story is that it's not all that uncommon. It is part of the fabric of Wall Street. It is something that makes those in power in the biz uncomfortable to talk about, so they either pretend it doesn't exist, or, if you confront them, their eyes glaze over and their lips press tightly together. Some will say that there's been progress. Sure, you can say that. Talk's cheap. But too often the progress is diluted. Compromised. And more often than not, the road on that highway of progress is littered with the wrecks of careers such as Glenn Capel. The thing with victims such as Capel is that they tend to be deemed unfortunate but acceptable collateral damage. He got a few bucks from settlements of his lawsuits. Hey, good for him but let's not get all tied up with the unfortunate stories of the likes of Glenn Capel. It's sad. Too bad. But we've made progress. Let's just move on, okay?Ummm, no, it's not okay. Never was. Still isn't. This isn't a cost-benefits analysis. This is a man's life.

http://www.brokeandbroker.com/5907/jean-pierre-10cir-fusionpharm/
After a 12-day jury trial in the United States District Court for the District of Colorado, attorney Guy M. Jean-Pierre, 60,  was found guilty on 28 of 29 counts of conspiracy to commit securities fraud, wire fraud and aiding and abetting, mail fraud and aiding and abetting, securities fraud and aiding and abetting, money laundering and aiding and abetting. Jean-Pierre, was sentenced to 84 months in prison plus three years of supervised release. He appealed. He lost.