4 questions for Wall Street fraud expert Bill Singer (Financial Planning Podcast hosted by Julie Coleman)FINRA Suspends Unregistered Female for Following Registered Male Rep's Orders (BrokeAndBroker.com Blog)International Money Launderer Sentenced to More Than 11 Years in Prison for Laundering Millions of Dollars in Cyber Crime Schemes / Defendant Ordered to Pay Victims in U.S. and Elsewhere More Than $30 Million in Restitution (DOJ Release)Ukrainian Cyber Criminal Extradited For Decrypting The Credentials Of Thousands Of Computers Across The World And Selling Them On A Dark Web Website (DOJ Release)
In a new episode of the Financial Planning podcast hosted by reporter Julie Coleman, lawyer Bill Singer answers four questions:
- Why is fraud so difficult for wealth managers to detect and prevent?
- How can advisors help regulators and law enforcement catch fraudsters?
- What is the craziest case of fraud you've heard of?
- The SEC seems to be releasing a lot of fraud cases - what do you think is the reason for this?
[A]laumary and his coconspirators used business email compromise schemes, ATM cash-outs and bank cyber-heists to steal money from victims and then launder the money through bank accounts and digital currency. He previously pleaded guilty in the Southern District of Georgia in two money laundering cases.In the first case, which was filed and investigated in the Southern District of Georgia, Alaumary conspired with others who sent fraudulent "spoofed" emails to a university in Canada in 2017 to make it appear the emails were from a construction company requesting payment for a major building project. The university, believing it was paying the construction company, wired $11.8 million CAD (approximately $9.4 million USD) to a bank account controlled by Alaumary and his co-conspirators. Alaumary then arranged with individuals in the United States and elsewhere to launder the stolen funds through various financial institutions.Weeks later, Alaumary arranged for a co-conspirator in the United States to make several trips to Texas to impersonate wealthy bank customers in a scheme to steal hundreds of thousands of dollars from victims' accounts using the victims' stolen personally identifiable information.In the second case, which was transferred to the Southern District of Georgia from the Central District of California for his guilty plea and sentencing, Alaumary recruited and organized individuals to withdraw stolen cash from ATMs; he provided bank accounts that received funds from bank cyber-heists and fraud schemes; and, once the ill-gotten funds were in accounts he controlled, Alaumary further laundered the funds through wire transfers, cash withdrawals, and by exchanging the funds for cryptocurrency. The funds included those from a 2019 North Korean-perpetrated cyber-heist of a Maltese bank. Other victims of Alaumary's crimes included banks headquartered in India, Pakistan and Malta, as well as companies in the United States and U.K., individuals in the United States and a professional soccer club in the U.K.Alaumary is the fourth defendant in this investigation to plead guilty in federal court to fraud felonies and be sentenced in the Southern District of Georgia. In 2019, co-defendant Uchechi Ohanaka was sentenced to 125 months' imprisonment followed by five years of supervised release; Jennal Aziz was sentenced to six months' imprisonment followed by three years of supervised release; and Kelvin Desangles was sentenced to 57 months' imprisonment followed by three years of supervised release.
In or about 2017, MICHAEL ACKERMAN and others started a purported cryptocurrency "investment" fund (the "Fund") and recruited hundreds of individual investors into the Fund. The Fund was an investment club that allowed its members to contribute U.S. dollars, which the investors were told would then be used to invest and trade in Bitcoin and other cryptocurrencies. ACKERMAN was held out as the Fund's chief trading officer and personally controlled the Fund's primary trading account on an online cryptocurrency exchange. Based on figures provided by ACKERMAN, the Fund claimed that its proprietary trading algorithm was earning approximately 15 percent in profit for investors each month.By December 2019, ACKERMAN claimed that the Fund investment pool - which consisted of approximately $37 million in original investor contributions - had grown in value to approximately $315 million. ACKERMAN's claims about the performance of the Fund were communicated to existing Fund investors as well as prospective investors, some of whom were induced to invest in the Fund in the hopes of enjoying high rates of return.The rates of return that ACKERMAN reported on the Fund investments, and its overall Fund balance, were false. In reality, the primary trading account used by ACKERMAN had an account balance that never exceeded approximately $5 million. To support his false claim that the Fund's investments were earning 15 percent in monthly profits and had grown to approximately $315 million, ACKERMAN doctored numerous account screenshots that he knew were being used to communicate with Fund investors.Instead of investing and trading on behalf of the Fund, ACKERMAN stole at least $9 million in investor contributions and used them to bankroll a lavish lifestyle that included his purchase of multiple pieces of real estate, hundreds of thousands of dollars of Tiffany jewelry, vehicles, travel, and personal security services.
[I]vanov-Tolpintsev controlled a "botnet," which is a network of computers infected with malware and controlled as a group without the owners' knowledge. He used the botnet to conduct brute-force attacks designed to decrypt numerous computer login credentials simultaneously. During the course of the conspiracy, Ivanov-Tolpintsev stated that his botnet was capable of decrypting the login credentials of at least 2,000 computers every week. Ivanov-Tolpintsev then sold these login credentials on a dark web website that specialized in the purchase and sale of access to compromised computers. Once sold on this website, credentials were used to facilitate a wide range of illegal activity, including tax fraud and ransomware attacks.
[B]etween July and September 2017, the defendants offered and sold digital assets designated as "RvT tokens" to the general public, including U.S. investors, for the purpose of capitalizing Rivetz's business. The complaint alleges that Sprague marketed RvT as an investment opportunity by promoting the value of RvT to investors; highlighting that RvT would be made available to trade on digital asset trading platforms; describing where RvT could be resold; touting Sprague's abilities and managerial skills, including his experience as a former officer and director of a public company; and claiming RvT would increase in value as a result of Rivetz's efforts. According to the complaint, the RvT tokens could not be used to purchase any good or service at the time they were sold. As alleged, the defendants' offers and sales of RvT, which raised the equivalent of $18 million in digital assets from investors, were not registered with the SEC and did not qualify for any exemption from registration.
[B]etween 2016 and August 2019, Bauman authored at least a dozen legal opinion letters falsely stating that certain shareholders were not affiliated with the public companies whose stock they held. The complaint alleges that in reality, the public companies and shareholders were under common control, and the shareholders were therefore affiliates of the companies. Stock held by an affiliate of a public company is restricted, and only small quantities of such stock can be legally offered or sold to the public without a securities registration statement in effect. A registration statement contains important information about a public company's business operations, financial condition, results of operation, risk factors, and management. According to the complaint, Bauman provided the opinion letters to transfer agents - entities that record the ownership and transfer of securities, and thus routinely track whether particular securities are subject to resale restrictions. The transfer agents allegedly relied on Bauman's false letters in treating shares of stock as unrestricted, and recording transfers on that basis. The complaint alleges that Bauman's letters thus facilitated sales of millions of shares that could not legally be sold to the public without a registration statement.
Between January 2016 and August 2019, all equity and debt research reports published by SIS omitted required disclosures or included inaccurate disclosures. Specifically, SIS published 411 equity research reports with a total of 656 disclosure omissions or inaccuracies in violation of FINRA Rules 2241(c) and 2010. Similarly, between July 16, 2016 and August 2019, SIS published 60 debt research reports with a total of 333 disclosure omissions in violation of FINRA Rules 2242(c) and 2010. SIS's omissions were the result of the firm's failure to establish and maintain a supervisory system reasonably designed to achieve compliance with the disclosure requirements of FINRA Rules 2241(c) and 2242(c), as well as its failure to enforce its relevant written supervisory procedures. As a result, SIS also violated FINRA Rules 3110(a)-(b) and 2010.
On August 3, 2009, the State of Florida entered a consent order that suspended Tomaras for ten business days and fined him $10,000 for failing to observe high standards of commercial honor and just and equitable principles of trade in connection with receiving referrals from insurance agents and opening new accounts for transferring customers.
During the relevant time period, R.F. Lafferty had a written policy that required employees to disclose to the firm the details of any proposed outside business activity and receive approval from the firm prior to engaging in the activity. The policy made clear that it extended to all outside activities, even if an activity was outside the securities industry. The policy stated that outside business activities included a wide range of activities such as employment with an outside entity, serving as a director, officer, or partner, or receiving compensation or having the reasonable expectation of compensation from any other person as a result of a business activity outside the scope of an individual's employment with the Firm.In June 2017, Tomaras filed Articles of Organization with the Florida Secretary of State for TESA LLC, doing business as Clean Cut Professional Lawn and Landscape, a commercial and residential landscaping company. He identified himself as the sole owner of the LLC. Tomaras was also the joint account holder of the TESA LLC bank account and credit card. Tomaras oversaw the manager of the business, signed paychecks for staff, and paid the company expenses. TESA LLC had revenues of approximately $260,000 in 2017; $329,600 in 2018; $451,600 in 2019; and $410,600 in 2020.On his annual compliance questionnaires in 2017, 2018, and 2019, Tomaras falsely stated that he did not engage in any undisclosed outside business activities. Tomaras did not disclose his outside business activities in TESA LLC to R.F. Lafferty until April 2020, after it was discovered by FINRA and brought to the firm's attention.By engaging in an outside business activity involving TESA LLC without providing prior written notice to R.F. Lafferty, Tomaras violated FINRA Rules 3270 and 2010.
In July and August 2020, Respondent impersonated two firm customers during three telephone calls with the Carrier. Respondent posed as the customers on calls to the Carrier's customer service department in order to obtain information about the customers' existing variable annuity contracts. Respondent obtained information for one of the two customers. Neither of the customers authorized DeAngelis to impersonate them.Therefore, by impersonating two customers on telephone calls to the Carrier, DeAngelis violated FINRA Rule 2010.