The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

October 1, 2021

Veteran Wall Street Reform Advocate Bill Singer Esq. Renews Call for Antifraud Fund and PIABA FINRA Board Seat (BrokeAndBroker.com Blog)

Chicago Man Charged in Federal Court With Engaging in Unauthorized Trading That Caused $30 Million in Losses (DOJ Release)

SEC Charges Rogue Trader Who Bankrupted His Firm (SEC Release)

SEC Charges Recidivist TV Production Company and Its Founder and CEO with Offering and Selling Securities in Unregistered Offerings (SEC Release)

Boerne Man Sentenced for Ponzi Scheme with over $7.4 M in Losses (DOJ Release)

SEC Charges Former Executives of Registered Investment Adviser with Fraud (SEC Release)

Cattle Broker Sentenced to Prison for Wire Fraud, Ordered to Pay $2.1 Million in Restitution (DOJ Release)

SEC Dismisses Application for Review of FINRA Bar/Suspension
In the Matter of the Application of Blair Edwards Olsen for Review of Action Taken by FINRA (SEC Opinion)

TD Ameritrade Ordered to Pay over $2 Million in Damages by FINRA Arbitrators
In the Matter of the Arbitration Between John Elliott, Claimant, v. TD Ameritrade Clearing, Inc. and TD Ameritrade, Inc., Respondents (FINRA Arbitration Award)

DreamFunded Dream Faded At FINRA (BrokeAndBroker.com Blog)

Did SEC Permanently Bar Twice The Same Frivolous Whistleblower Claimant? (BrokeAndBroker.com Blog)

A Thought Piece on Risk from SEC Commissioner Caroline A. Crenshaw (BrokeAndBroker.com Blog)

http://www.brokeandbroker.com/6087/finra-piaba-arbitration/
It is inexcusable that Wall Street as an industry and FINRA as a broker-dealer community tolerates unpaid securities arbitration awards - a point recently made, yet again, by PIABA in a compelling report. As such, I urge FINRA to create a Wall Street Anti-Fraud Fund, a proposal that I have made for some two decades and which continues to fall on deaf ears. Wall Street should have an "Anti-Fraud Fund" for the benefit of defrauded public customers who have proven the liability of a FINRA member firm but are unable to fully collect their compensatory damages, costs, and fees because of that firm's insolvency. I do not favor extending such a guaranty into punitive damages or "unreasonable" attorneys' fee and other charges. Fervently, I believe that the securities industry has the wherewithal and the moral/ethical obligation to put its money where its dirty mouth has been. There may be legitimate debate as to how best to fund the anti-fraud fund, but that only goes to the mechanics of doing the right thing.

https://www.justice.gov/usao-ndil/pr/chicago-man-charged-federal-court-engaging-unauthorized-trading-caused-30-million
-and-
https://www.sec.gov/news/press-release/2021-205

Keith Wakefield was charged in an Information filed in the United States District Court for Northern District of Illinois https://www.justice.gov/usao-ndil/press-release/file/1437876/download with one count of securities fraud. As alleged in part in the DOJ Release:

[W]akefield worked as the head of fixed income trading in the Chicago office of a broker-dealer.  From 2017 to 2019, Wakefield knowingly and fraudulently engaged in unauthorized speculative trading in U.S. Treasury bonds using his employer's trading accounts, causing more than $30 million in losses to the employer and its counterparties, the information states.  Wakefield attempted to conceal the unauthorized trades and losses by entering fake off-setting trades into a clearing broker's order system, creating the false impression that he had profitably traded through a different clearing broker, the charge alleges.

In addition to the trading scheme, Wakefield allegedly embezzled approximately $820,000 from the employer by falsifying the company's books and records to create fake commissions that Wakefield knew were not actually owed to him.

In a Complaint filed in the United States District Court for the Northern District of Illinois
https://www.sec.gov/litigation/complaints/2021/comp-pr2021-205.pdf, the SEC charged
IFS Securities, Inc.'s former Managing Director/Head of Fixed Income Trading, Keith A. Wakefield, with violations of the antifraud provisions of the Securities Act and the Securities Exchange Act, and with aiding and abetting IFS's failure to maintain accurate books and records and operate with sufficient net capital. Wakefield  agreed to settle the SEC's charges by consenting to a permanent injunction and to pay disgorgement plus prejudgment interest and a civil penalty. Parallel criminal charges were filed against Wakefield. As alleged in part in the SEC Release:

[F]rom June through August 2019, Wakefield engaged in unauthorized speculative trading in U.S. Treasury securities, on behalf of IFS and incurred millions of dollars in losses for the firm. The complaint further alleges that Wakefield engaged in a variety of fraudulent practices to create the appearance of fictitious trading profits and disguise his unauthorized trading losses, including falsifying IFS's books and records. As alleged, from January 2017 through August 2019, Wakefield also fraudulently obtained approximately $820,000 in commission income from IFS based on fictitious commission payments from customers that he fabricated and recorded on IFS's books and records. According to the complaint, Wakefield's fraud came to an end in August 2019 when IFS was unable to honor millions of dollars in unauthorized fixed income securities trades executed by Wakefield with more than one dozen counter-parties. As a result, IFS was forced to close its business, withdraw its registration as a broker-dealer, and file for bankruptcy.

In a Complaint filed in the United States District Court for the Central District of California
https://www.sec.gov/litigation/complaints/2021/comp25237.pdf, the SEC charged Punch TV Studios, Inc. and its Founder/Chief Executive Officer, Joseph Collins with violating the securities registration provisions of Section 5(a) and (c) of the Securities Act. As alleged in part in the SEC Release:


[F]rom approximately January 2018 until June 2020, the defendants conducted two offerings of Punch TV's common shares that were neither registered with the SEC nor exempt from registration. The complaint alleges that those offerings took place shortly after Punch TV settled to an SEC order that halted a prior securities offering under Regulation A of the Securities Act and temporarily suspended its Regulation A exemption from registration, after Punch TV had repeatedly failed to comply with regulatory requirements. Following the settlement, Collins and Punch TV allegedly continued offering and selling Punch TV shares in violation of the order and without satisfying any registration offering exemptions.

https://www.justice.gov/usao-wdtx/pr/boerne-man-sentenced-ponzi-scheme-over-74-m-losses
Victor Farias, 48, pled guilty in the United States District Court for the Western District of Texas
to one count of wire fraud, and he was sentenced to 135 months in prison and ordered to pay $7,424,927.10 in restitution. As alleged in part in the DOJ Release, Farias"

owned and operated Integrity Aviation & Leasing (IAL).  Farias used IAL to perpetuate a Ponzi scheme resulting in net losses to victims of over $7.4 million.  Farias persuaded victims to invest in IAL by misrepresenting that investors' funds would be used to purchase aircraft engines and that the aircraft engines would be leased to airlines for profit.  In addition, Farias also told investors he would not pay himself a salary or commission. 

Instead, Farias bought one aircraft engine and sold it shortly thereafter, making no profit for investors.  He used investors' money to pay himself a salary, commissions, and personal expenses.  He also paid out false investment returns to prior investors and financed the construction of the Fair Oaks Country Store, a convenience store unrelated to the IAL investment.

SEC Charges Former Executives of Registered Investment Adviser with Fraud (SEC Release)
https://www.sec.gov/news/press-release/2021-204
Without admitting or denying the findings in an SEC Order, former TCA Fund Management Group Corp.:
each agreed to the entry of a cease-and-desist order. The SEC Order found that Press violated the antifraud provisions of the federal securities laws and that Silverman aided and abetted violations of certain antifraud provisions. Press agreed to be barred from the securities industry, and to pay disgorgement of overcharged management and performance fees he received of $4,409,546 plus prejudgment interest of $755,178, and a penalty of $292,570; and, further, Silverman agreed to a limitation on activities from acting in a director or officer capacity in the securities industry, with a right to apply after three years, and to pay a penalty of $50,000. As alleged in part in the SEC Release:

[T]hrough Press's actions, TCA fraudulently inflated net asset values and performance of the TCA funds by recording non-binding transactions and fraudulent investment banking fees on the funds' books and records. According to the order, the inflated asset values and false performance results were included in promotional materials and account statements distributed to the TCA funds' current and prospective investors, which showed the funds as always having positive monthly returns. In fact, the order finds, without the fraudulently booked transactions, the TCA funds would have had at least 34 months of negative returns since inception. Among other things, the order also finds that on at least 14 separate occasions, Press made the decision to waive monthly management and performance fees the TCA funds owed to TCA or TCA-GP in order to achieve higher performance results, without disclosing to investors that the higher figures were due to the fee waivers, rather than the successful result of TCA's investment strategies.

The SEC's order against Silverman finds that she included the non-binding transactions and fraudulent investment banking fees in data she prepared that was used to calculate the TCA funds' asset values and performance results.

https://www.justice.gov/usao-mdga/pr/cattle-broker-sentenced-prison-wire-fraud-ordered-pay-21-million-restitution
Collis Robert Todd, a/k/a Robert Todd, a/k/a Collis Todd, aka Robert Todd, a/k/aRobert C. Todd, 65, pled guilty in the United States District Court for the Middle District of Georgia, and he was sentenced to serve 33 months in prison plus three years of supervised release, and ordered to pay $2,137,000 in restitution. As alleged in part in the DOJ Release:

Todd worked as a cattle and corn broker from 2008 through 2017. During that time, Todd entered into an agreement with an investor who supplied the money used to execute deals negotiated and conducted by Todd. The general understanding was that profits would be split evenly. Todd did not invest the money as promised in certain deals, instead using it for his own purposes. Todd sometimes sent money back to the investor representing the amount to be profit, which was not true. This was done to disguise Todd's theft and to keep the investor investing in current and future deals. Todd's deceit continued when he made a phone call on Nov. 6, 2016, to the investor's business manager, claiming he would sell cows and calves he previously purchased on behalf of the investor, with the investor's money, as part of the "Big Cow" deal and transmit the proceeds to the investor. In fact, the cows and calves did not exist. The investor lost $2,137,000 in the scheme.

In the Matter of the Application of Blair Edwards Olsen for Review of Action Taken by FINRA (SEC Opinion, '34 Act Rel. No. 93216; Admin. Proc. File No. 3-19629 / / September 30, 2021)
https://www.sec.gov/litigation/opinions/2021/34-93216.pdf
As set forth in the "Syllabus" to the SEC Order:

Blair Edwards Olsen, formerly associated with FINRA member firm Lincoln Investment, seeks review of action FINRA took in a proceeding conducted pursuant to FINRA Rule 9552. In that proceeding, FINRA suspended Olsen on August 29, 2019, and then barred Olsen on November 11, 2019, from association with any FINRA member firm for failing to respond to FINRA's requests for documents and information pursuant to FINRA Rule 8210. After Olsen filed his appeal, FINRA vacated the bar but kept the suspension in place until Olsen fully complied with the document and information requests. FINRA now contends that Olsen's appeal of the bar is moot and that Olsen failed to exhaust his administrative remedies as to the suspension. For the reasons discussed below, we dismiss Olsen's application for review.

In setting out its rationale for dismissing Olsen's application, in part the SEC Order asserts that [Ed: footnote omitted]:

Olsen failed to follow FINRA's process for challenging his suspension. FINRA provided Olsen the opportunity to avail himself of its administrative process by: (1) taking "corrective action" by producing the documents and information requested; (2) filing a "request for a hearing" in response to the Notice of Suspension; or (3) filing a "request for termination of the suspension on the ground of full compliance with" FINRA's requests. Indeed, FINRA provided Olsen an opportunity to challenge his suspension even after he filed his appeal with the Commission by providing the requested documents and information and filing a request for termination of the suspension on the ground of full compliance. By not taking any of these steps, Olsen failed to exhaust his administrative remedies and cannot challenge the suspension now before the Commission. 16 We therefore leave in place Olsen's suspension. 

In a FINRA Arbitration Statement of Claim and as amended, public customer Claimant Elliott asserted breach of fiduciary duty; breach of contract; breach of covenant of good faith and fair dealing; negligence; unjust enrichment; conversion; breach of express warranties; unauthorized trading; and negligence. The FINRA Award asserts that the "causes of action relate to a large number of options and various securities held in Claimant's Portfolio Margin account." Claimant Elliott ultimately sought at the hearing:

1. $10,880,456.84 on his claim for negligence;
2. $11,843,852.72 on his claim for breach of contract;
3. Return of cash and securities in Claimant's account on his claim for rescission; and
4. Such other relief the Panel deems just and equitable.

Respondents generally denied that allegations and in a Counterclaim and Amended Counterclaim sought indemnification. The FINRA Arbitration Panel found the TD Respondents joint and severally liable and ordered them to pay to Claimant Elliott $2,082,148.30 in compensatory damages, and denied the Counterclaim.

DreamFunded Dream Faded At FINRA (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/6085/dreamfunded-finra-crowdfunding/
There was a time, not many years ago, when crowdfunding was all the rage and the JOBS Act was supposed to democratize Wall Street. Desperate or naïve entrepreneurs looking to raise modest amounts of capital were attracted by the promise that their ventures would be posted on a crowdfunding website. Except, as industry veterans knew, the investors with the real cash don't waste time on crowdfunding websites. As such, after the crowdfunding sites collected their fees, more often than not, the listings sat, barely getting nibbles, wasting away. Worse, many of the offers for funding proved to be scams and frauds. Some folks raised money and launched their business -- that's great. If the laws had been better drafted, if the sector had been better policed, then we might have realized the vision. In the end it was just another one of those things that fizzled out without much notice or fanfare. And so we move on to the next flash in the pan. NFTs anyone? 

http://www.brokeandbroker.com/6084/sec-frivolous-whistleblower/
Could two different whistleblower Claimants each filed hundreds of Forms TCR and Forms WB-APPs with the SEC when both were riled up about personal mortgage foreclosures? Sure, that's possible. Could it be that two people living in the same house and subjected to same foreclosure each submitted hundreds of filings to the SEC? Sure, that's possible too. Could it be that two unrelated people were each victimized by foreclosures and each went on a filing rampage? Sure, that's also possible. The thing is, however, that it might have been nice for the SEC to have clarified whether we're talking about one or two persons because the inference that I'm drawing is the same Claimant was permanently barred twice. See what you think.

http://www.brokeandbroker.com/6076/sec-crenshaw-risk/
Recently, SEC Commissioner Caroline A Crenshaw spoke about the aftermath of the 2008 financial crisis, better known in some circles as the "Great Recession." In recent years, I have welcomed the voices of a number of SEC commissioners, who have had the audacity to shake things up. Some voices have been strident -- at times, too much so. Some have voiced opinions that make me roll my eyes. At times, however, those same voices prompt me to reconsider long-held views or to ponder emerging issues that I had not anticipated. No, I do not favor the SEC or any big-government regulator devolving into a debating society. That's not their mandate and that's not effective regulation. On the other hand, sincere, rational, debate is the forge where we hammer out better regulations and enunciate developing enforcement policy. It is in that spirit that I applaud Commissioner Crenshaw's recent comments about the role of "risk" in our markets.

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