Securities Industry Commentator by Bill Singer, Esq.

October 31, 2017

Utah Financial Advisor Pleads Guilty to Tax Evasion, Securities Fraud and Wire Fraud (Department of Justice Press Release 17-1221

From 2009 through 2017, Henry Brock served as President of a financial services company he founded, and through which he marketed and sold an "IRA Exit Strategy" to potential investors.  The strategy purportedly provided the avoidance of taxes on IRA withdrawals and Brock raised over $10,8 million. In furtherance of the strategy, Brock allegedly caused his business to issue tax forms to his clients falsely representing that they were investors in his business who incurred losses, which served to offset the clients' tax liabilities.  

The Department of Justice alleged that Brock's scheme resulted in his clients filing some  $3.8 million in bogus business losses and resulting in in excess of a $1.1 million tax loss. Brock pleaded guilty to tax evasion, securities fraud and wire fraud.  In addition to supervised release, restitution, and monetary penalties, Brock faces a statutory maximum sentence of five years in prison for tax evasion, 20 years in prison for securities fraud and 20 years in prison for wire fraud. 

FINRA Settlement Is A Matter Of Time And Price

Today's featured FINRA settlement involves yet another dispute about unauthorized discretion and the proper use of Time & Price discretion. Additionally, Blog's publisher Bill Singer, Esq. is troubled by an emerging trend of FINRA AWC Respondents submitting Corrective Action Statements. As Bill explains in his commentary at the end of the article, such statements are gratuitous and not required or mandated as part of the formal AWC. Sure, such recitations are often well intentioned but the road to Hell is paved with good intentions. READ

Connecticut Man Pleads Guilty To Participating In Multimillion-Dollar Ponzi Scheme (Department of Justice Press Release 17-348)

Steven Simmons was charged in the United States District Court for the Southern District of New York with soliciting over $6 million in investments for a hedge fund between 2013 and January 2017. Simmons pled guilty to one count of conspiracy to commit securities fraud and wire fraud.  The conspiracy count carries a maximum sentence of five years in prison and a maximum fine of $250,000, or twice the gross gain or loss from the offense. Also, he agreed to forfeit $6,900,000.

As set forth in the DOJ Press Release:     

Between 2013 and January 2017, SIMMONS solicited investments by falsely representing to investors that their funds would be used by the Hedge Fund for legitimate, specified investment purposes, that they would receive specific rates of return, and that their investments would not be placed at risk or commingled with other funds.  In fact, SIMMONS failed to invest the investor monies as promised, but, instead, diverted investor funds for his own use and also, together with others, used the money in a Ponzi-like fashion to fund the repayment of earlier investors in the Hedge Fund whose redemption requests could not be forestalled.

Among other false and misleading statements, SIMMONS told one investor ("Victim Entity-1") that its funds would be placed by the Hedge Fund with a highly successful group of portfolio managers and provided performance information for these portfolio managers.  In truth and in fact, SIMMONS solicited those investment funds from Victim Entity-1 for the purpose of repaying an earlier investor in the Hedge Fund which had demanded the return of its investment.  Most of Victim Entity-1's funds were, within minutes of their receipt by the Hedge Fund, wired to the earlier investor.  The following day, $50,000 was wired by the Hedge Fund to an account controlled by SIMMONS.  In a later consensually recorded conversation with a cooperating witness (the "CW"), SIMMONS expressed concern that Victim Entity-1 would contact the portfolio managers with whom it believed its funds were invested and learn that "there's no . . . money."  As part of the fraudulent scheme, Simmons also created and provided investors with false monthly statements.