The FINRA Expungement of A Customer Complaint That Was Not a Complaint Or From A Customer (BrokeAndBroker.com Blog)CFTC Charges Two Men and Their Companies with Commodity Pool Fraud, Other Violations (CFTC Release)CFTC Charges North Carolina Companies and Their Owners in $1 Million Foreign Currency Fraud and Misappropriation Scheme / Federal Court Issues Restraining Order Against Defendants Freezing Assets and Preserving Records (CFTC Release)
JPMorgan Chase Wins Stunning Victory Against High-Profile Whistleblower
Johnny E Burris, Plaintiff, v. JPMorgan Chase & Company, et al., Defendants (DAZ Order)
[G]ray and Holley, who was a pastor at Abundant Life Ministries in Flint, operated Treasure Enterprise, LLC, which fraudulently purported to provide financial planning and asset management services to investors. Holley and Gray solicited many of the victim investors at financial seminars held at churches throughout Michigan and other states.As alleged in the indictment, in order to lure the potential investors, many of whom took their money out of legitimate investments-such as individual retirement accounts (IRAs) and 401(k)s-Holley and Gray promised high, guaranteed returns, and the safe return of an investor's entire principal at the end of the investment period. The money, however, was not invested and did not earn the profits to pay the guaranteed interest payments. Instead, Holley and Gray, and others directed by them, simply deposited the victim investor funds into Treasure's bank accounts and then used the money for their personal benefit, for the benefit of Abundant Life Ministries, to make interest and principal payments to earlier investors, and to pay other Treasure employees.
[C]laimant provided important new information that prompted Commission staff to open an investigation into the alleged misconduct; (ii) Claimant's assistance during the investigation assisted the staff and saved Commission time and resources; and (iii) the charges in the Covered Action were directly based on Claimant's information.
[C]laimant alerted the Commission to an on-going fraud prompting the opening of the investigation, participated in multiple voluntary interviews with Commission staff, and provided numerous documents that assisted the staff in its investigation, saving Commission staff time and resources. There also have been no collections to date in the matter.
CFTC Charges North Carolina Companies and Their Owners in $1 Million Foreign Currency Fraud and Misappropriation Scheme / Federal Court Issues Restraining Order Against Defendants Freezing Assets and Preserving Records (CFTC Release)Mankad, CTAX Series, and CTAX PartnersThe defendants were charged in connection with the CTAX Series 1, LLC commodity pool (CTAX Pool). Mankad and CTAX Series are also charged with making false statements relating to the fraud to the NFA. The CFTC seeks restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the Commodity Exchange Act (CEA) and CFTC regulations.As alleged in the complaint, during the relevant period from approximately July 25, 2014 to approximately March 22, 2019, Mankad and CTAX Series (1) represented to pool participants that only experienced CTAs would trade funds in the CTAX Pool, when in reality Mankad, who was not a CTA and had limited, unsuccessful experience trading futures, engaged in much and eventually all trading in the CTAX Pool; (2) misrepresented and omitted material facts regarding brokerage commissions that would be charged to the CTAX Pool, when in fact Mankad and CTAX Partners misappropriated pool funds by extracting excessive commissions triggered by Mankad's own unauthorized trading; (3) beginning in July 2018, recklessly traded the CTAX Pool's assets in a manner that resulted in a loss of approximately 89 percent of the CTAX Pool's assets, resulting in significant losses to pool participants; (4) concealed those losses from pool participants by intentionally delaying the provision of monthly account statements to pool participants; and (5) falsified emails submitted to the NFA in connection with an NFA audit of CTAX Series and CTAX Partners to make it appear that defendants provided timely account statements to all pool participants. As a result of this conduct, pool participants lost more than $1.9 million, according to the complaint.Ohanian and Scottsdale WealthThe order requires Ohanian and Scottsdale Wealth to pay $338,000 in restitution and a $169,000 civil monetary penalty, requires both to cease and desist from any further violations of the CEA or CFTC regulations, as charged, and prohibits both from trading in commodity interests, registering with the CFTC, or engaging in activity requiring such registration for four years.Separately, the order finds that, during the relevant period, Ohanian and Scottsdale Wealth intentionally or recklessly omitted material facts from communications with pool participants, including (1) the full extent of Ohanian's relationship with and compensation from Mankad, CTAX Partners, CTAX Series, and another entity Mankad owned; (2) Ohanian's concerns regarding the fees associated with the CTAX Pool; (3) Ohanian's concerns regarding Mankad's reckless trading; and (4) details relating to the CTAX Pool's near-total loss in value beginning in July 2018. Ohanian and Scottsdale Wealth also failed to register as CTAs, which was required given their business of advising pool participants regarding the advisability of trading in futures.
Johnny E Burris, Plaintiff, v. JPMorgan Chase & Company, et al., Defendants (Order, 18-CV-03012, United States District Court for the District of Arizona)The complaint charges that from approximately March 2018 through the present, Storm Bryant and Elijah Bryant III, individually and through CapitalStorm LLC, Generationblack LLC, and Ncome LLC, have fraudulently solicited, and continue to fraudulently solicit, existing and prospective clients who are not eligible contract participants (ECPs) to engage in retail transactions in off-exchange foreign currency (forex) on a leveraged, margined, or financed basis. The defendants received approximately $1.05 million from approximately 94 clients during the relevant period, all of which the defendants misappropriated. Approximately $50,870 was sent back to clients as purported forex trading "profits" in the nature of a Ponzi scheme.Capital Storm, Generation Black, and Ncome, without registering with the CFTC as commodity trading advisors (CTA), and Storm and Elijah Bryant, without registering as associated persons of a CTA, respectively, solicited and continue to solicit clients or prospective clients through in-person solicitations as well as social media platforms such as Facebook and Instagram, including a website operated by Storm and Elijah Bryant, to induce non-ECP, retail clients to send the defendants funds. Storm and Elijah Bryant, both individually and as agents of Capital Storm, Generation Black, and/or Ncome, describes themselves as highly successful forex traders who generate tremendous returns for their clients. When the Bryants successfully induced non-ECP, retail clients to send them funds, the Bryants misappropriated the funds by receiving them or moving them into accounts held by Storm and/or Elijah Bryant in their own names and using the funds to purchase jewelry, rent homes, European travel, and fund the Bryants' personal trading accounts.
In language that is both blunt and blistering, the Court observed that:Plaintiff Johnny Burris ("Plaintiff") worked as a financial advisor for J.P. Morgan Chase & Co. and J.P. Morgan Securities, LLC (together, "Defendants") until November 2012, when he was terminated. In this action, which was filed in September 2018 (following an array of related proceedings between the parties in other forums), Plaintiff contends that he was fired for complaining about Defendants' efforts to push investors into risky, "bank managed" financial products and then improperly blacklisted from the financial industry, in violation of the whistleblower retaliation provisions of the SarbanesOxley Act of 2002 and the Dodd-Frank Act of 2010.The current issues before the Court, however, have nothing to do with whistleblower retaliation. Instead, they arise from Plaintiffs' systematic efforts to destroy electronically stored information ("ESI") from an array of phones, laptops, email accounts, and external storage devices. Plaintiff's evidence-destruction efforts took a variety of forms, including the repeated use of software programs called "BleachBit" and "iShredder," and spanned a period of years, beginning before (but in anticipation of) this litigation and accelerating as the litigation unfolded. Eventually, a court-appointed forensic expert was tasked with investigating the scope of Plaintiff's efforts to destroy ESI, but the day before Plaintiff produced certain devices to the expert, he used wiping software on them, too. Based on this and other conduct, the expert concluded, "to a reasonable degree of scientific certainty, that [Plaintiff] caused Potentially Relevant ESI to be irrevocably lost from his Electronic Media." (Doc. 73-1 at 3.)Following the issuance of the expert's report, Defendants filed a motion for terminating sanctions. (Docs. 78 [sealed], 84 [unsealed].) That motion, as well as Plaintiff's motion for leave to belatedly submit certain exhibits in opposition to the sanctions motion (Doc. 92), are now fully briefed and ripe for resolution. For the reasons that follow, Defendants' motion is granted, Plaintiff's motion is denied, and this action is terminated.
at Page 31 of the OrderPlaintiff does not propose any sanctions in lieu of dismissal, instead arguing that "there is no basis to impose any sanction whatsoever" (Doc. 89 at 1), but the Court would decline to impose lesser sanctions even if Plaintiff had proposed them. An adverse jury instruction or presumption that covers all of the destroyed evidence would have to be so broad that it would, itself, essentially terminate the case. Additionally, the sheer scope of Plaintiff's dishonesty and spoliation efforts-which the Court explicitly finds amounted to bad faith-makes this the rare case where it is impossible to have confidence that Defendants will ever have access to the true facts. Thus, the Court finds that although it did not impose alternative sanctions before dismissal, such sanctions are "not necessary" in this case. Valley Engineers, 158 F.3d at 1057.Of course, dismissal will be highly prejudicial to Plaintiff. But Plaintiff already had the opportunity to litigate several of his termination-related claims on the merits, via a two-week FINRA arbitration. This somewhat reduces the prejudice of dismissal. At any rate, because Plaintiff has engaged in such extensive misconduct and deception, without any obvious contrition or awareness of the wrongfulness of his conduct, there is a serious risk that further proceedings will continue to be plagued by a "pattern of deception and discovery abuse [which makes] it impossible for the district court to conduct a trial with any reasonable assurance that the truth would be available." Id. at 1058.