(DOJ Press Release) Pursuant to his guilty plea in federal court, George Trevor Porrata was sentenced to five years' imprisonment for conspiring to commit securities fraud and ordered to pay $1,046,385.50 in restitution and $400,000 in forfeiture. According to the DOJ Press Release:
[F]rom March 2010 to September 2013, Porrata directed press releases to be issued with false information to induce people to invest in Halberd, a company that purportedly produced aerial drones but, in fact, existed primarily on paper. Among other things, Porrata caused press releases to be issued about Halberd opening a sales and marketing office, owning a mass production facility and submitting a bid for a government contract. Contrary to these representations, this information was false and it caused unsuspecting victims to invest in Halberd and also caused the company's stock price to be artificially inflated. Porrata and his co-conspirators sold their own shares of the company at the inflated price and caused investor losses of more than $1 million.
Louisiana Resident Indicted in Stolen ID Refund Fraud Scheme (DOJ Press Release 17-1386) The human imagination is seemingly limitless and often soars to awe-inspiring heights in the face of adversity. With that in mind, consider this portion of the DOJ Press Release:
According to the indictment, Aaron Daniels conspired with others to defraud the United States by filing tax returns with the Internal Revenue Service (IRS) that sought fraudulent refunds. Daniels allegedly obtained the IDs of inmates he was incarcerated with in the East Carroll Detention Center and provided this information to his co-conspirators in exchange for a fee so they could file fraudulent tax returns. Daniels is also charged with assisting in the preparation and presentation of seven false tax returns, including his own personal returns, which allegedly included false dependents and education credits, and sought inflated refunds.
Widow Lacks Standing In FINRA Arbitration Involving Husband's IRA (BrokeAndBroker.com Blog) t's another day in the Compliance Department on Wall Street and the mail has just arrived. We got a few letters that are clearly coming from unhappy campers. Time to get out the old rubber stamp and mark them "RCVD" and enter the data into the online "Customer Complaint" file. Next, we notify the registered rep involved. Next, we arrange to amend the rep's Form U4 and to notify FINRA of the regulatory disclosable event. Ho hum . . . stamp . . . type . . . send. That's the compliance assembly line. The problem is whether all that stamping and processing is going on a tad too quickly and without someone asking whether the correspondence contains a "grievance" from a "customer." Why do those questions matter? Consider today's featured FINRA arbitration.
SEC Continues Crackdown on Brokers Defrauding Customers (SEC Press Release 2017-223) In Securities And Exchange Commission, Plaintiff, v. Zachary S. Berkey and Daniel T. Fischer, Defendants. (Complaint, United States District Court Southern District Of New York, 17-CV-09552),the federal regulator alleged that ten customers of Four Points Capital Partners LLC (where the Defendants had worked) incurred $573,867 losses while Berkey and Fischer respectively earned about $106,000 and $175,000 in commissions.
The FINRA Auction Market For Regulatory Fines And Suspensions (BrokeAndBroker.com Blog)At first blush, today's BrokeAndBroker.com Blog presents two somewhat mundane FINRA regulatory settlements. Upon further examination, our publisher Bill Singer, Esq. sees these two settlements as examples of a troubling trend in Wall Street regulation. As Bill would explain, imagine that we're on a hypothetical "Main Street" and we have two cars both parked at expired meters. When the cop on the beat comes upon both vehicles, one has been at an expired meter for one-hour beyond its time and the other for 45-minutes. Bottom line: both vehicles haven't fed the meter and both get a ticket. You'd sort of expect that each driver would pay the same fine -- let's say $100. How would you feel if, after negotiations with a City traffic cop, one driver paid $75 and the other paid $100? To add to that hypothetical, it turns out that both drivers have $1,000 in unpaid parking tickets but one driver's license is suspended for 30 days and the other's for 45 days
Two Men Charged In Theft Of Over $2 Million In Stock Certificates From Deceased Manhattan Woman (DOJ Press Release) In United States of America, V. Stephen Decker and Luis Mercado, Defendants (Indictment , United States District Court for the Southern District of New York, 17-CR-738) Defendants were charged with conspiracy to commit wire fraud, wire fraud, and aggravated identity theft. The wire fraud counts each carry a maximum sentence of 20 years in prison; and the one count of aggravated identity theft, carries a mandatory sentence of two years in prison. READ FULL TEXT INDICTMENT
Financial Adviser Settles Charges for Defrauding Private Equity Fund Investors (SEC Litigation Release No. 24003) Pursuant to Securities and Exchange Commission v. James C. Tao and Donna Boyd (f/k/a Donna Chen) (Complaint, United States District Court for the Southern District of Texas, Civil Action No. 4:17-cv-03678 ), Defendant Tao settled charges that he defrauded investors in Presidio Venture Capital by making material misstatements in offering documents and misappropriating investor funds. Further, Tao and his former partner, Defendant Boyd, settled charges for violating broker-dealer registration requirements by soliciting sales of interests in the funds, which were securities not offered by the brokerage firm with which they were associated. Without admitting or denying the charges, Tao agreed to injunctions and to pay $155,970.67 disgorgement, $7,965.65 interest, and a $150,000.00 penalty; and Boyd agreed to an injunction and to pay a $10,000.00 penalty. Both defendants have also agreed to follow-on collateral administrative bars. READ the SEC Complaint
Feds Halt Seinfeld Bottle Deposit Scam Let me take you back to 1996. To the Seinfeld show. To what was known then -- and now lives on in legend -- as the two-part "The Bottle Deposit" episode. Part One opens with Peterman arranging to have Elaine bid on John F. Kennedy's golf clubs and moves on to involve Jerry needing to have his car repaired. More importantly for Seinfeld fans, the episode involves a debate between Newman and Kramer as to whether you can arbitrage the New York State five-cents-bottle-deposit-refund by tendering cans and bottles in Michigan, which offers ten cents per item. Kramer explains that it's an old strategy (one that he tried but failed at) and says that the flaw is in the transportation costs, which cancel out the extra nickel of profit. Newman can't get the idea out of his head and realizes that the heavy flow of mail for the upcoming Mother's Day holiday requires sorting in Saginaw, Michigan. Why Saginaw? Hey, it's Seinfeld and you just have to accept the idiocy. In any event, Newman, an employee of the United States Postal Service, arranges to drive a "spillover mail" truck because he figures there will be excess capacity -- which will allow him to transport his cache of empty cans and bottles for free. It is the loophole that many have searched for but failed to find. In Part Two, while driving to Michigan, Kramer and Newman spot Jerry's supposedly stolen car (a long story starting in Part One and not one I'm going into here). Suffice it to say that Kramer and Newman are now caught in an existential struggle over whether to drive straight on to Saginaw and cash in their booty of cans and bottles, or, in the alternative, to follow Jerry's stolen car as it heads for Ohio. Alas, as they chase after Jerry's car, the dynamic duo toss empty cans and bottles overboard in order to lighten their load and to gain speed -- all of which ends with Kramer dumping Newman. As with so many of Kramer's and Newman's schemes, this one ends in catastrophe.
What, you might rightly ask, do the Seinfeld "The Bottle Deposit" episodes have to do with the legal, regulatory, and compliance focus of the highly-regarded and ever-so-serious BrokeAndBroker.com Blog? Great question. Read on for the equally wonderful answer. Enjoy the video.
United States of America v. Michael T. Flynn, Defendant (17-CR-00232, United States District Court for the District of Columbia) Pursuant to Lieutenant General Michael T. Flynn (Ret.), of Alexandria, Va., Dec. 1, 2017, plea of guilty to making false statements to FBI agents, in violation of 18 U.S.C. 1001, the Securities Industry Commentator updates its files to include the FULL TEXT of the Criminal Information, Plea Agreement, and Statement of the Offense.
SEC Emergency Action Halts ICO Scam (SEC Pres Release 2017-219) The SEC's new Cyber Unit filed its first charges charges in the United States District Court for the Eastern District of New York against Dominic Lacroix, and his company, PlexCorps alleging that Lacroix and PlexCorps used the Internet to market and sell PlexCoin securities, which were represented as yielding 1,354 percent profit in less than 29 days. Sabrina Paradis-Royer, Lacroix's alleged partner, was also charged. The SEC Press Release characterizes Lacroix as a "recidivist Quebec securities law violator," and also, characterizes PlexCoin as a "fast-moving Initial Coin Offering (ICO) fraud that raised up to $15 million from thousands of investors since August. . . " The SEC obtained an emergency court order freezing the assets of PlexCorps, Lacroix, and Paradis-Royer. READ the FULL TEXT Complaint
SEC Files Fraud Charges Against Microcap Company and Its CEO (SEC Litigation Release No. 2400) The SEC filed a Complaint in the United States District Court for the Southern District of New York, alleges that a microcap company and its CEO conducted a fraudulent scheme to mislead investors about the company's success and prospects, hide its losses, inflate the value of its assets, and artificially prop up its stock price. READ the FULL TEXT SEC COMPLAINT
Digital Display Advertising Firm, Executives Charged With Bilking Investors (SEC Press Release 2017-221) The Securities and Exchange Commission filed a Complaint in the United States District Court for the Western District of Washington alleging that Digi Outdoor Media Inc.'s former chief executive officer, Donald MacCord Jr., and chief financial officer Shannon Doyle raised nearly $4.5 million in promissory notes by claiming they would use the funds to construct and install digital signs for commercial advertising around Washington, D.C.; however, they allegedly diverted millions for their personal use and use fake invoices and sham loans to further their fraud. Separately, federal criminal charges were filed against MacCord for conspiracy to commit wire fraud, submitting false writings to a government agency, obstruction of official proceedings, and destruction, alteration or falsification of records in federal investigations; and against Doyle for conspiracy to commit wire fraud and obstruction of official proceedings. READ the FULL TEXT SEC COMPLAINT
Health Care Fraud: Texas Doctor, Nurses Exploited ‘Trust-Based' System (FBI Press Release) In August 2017, Dr. Jacques Roy was sentenced to 35-years in federal prison and ordered to repay $268 million for his role in a conspiracy involving hundreds of thousands of patients in a home health care fraud; recently, Cynthia Stiger was the last of seven defendants sentenced in the scheme.
Stockbrokers Succession Plan Grapples With Mine, Ours, and Yours (BrokeAndBroker.com Blog)
With Wall Street's Baby Boomers heading into retirement and new blood angling to take over the departing reps' accounts, today's featured FINRA disciplinary settlement offers some guidance concerning what appears to be a succession plan that arranged to migrate shared accounts to the exclusive oversight of the eventual successor rep. As with such hand-offs of business from the former to the new guy, not everything was anticipated and it seems that no one fully thought through how the former rep would stay connected with customers during the transition. You got "my" business, you got "our' business, and you got "your" business and all those different states came crashing together in a problematic fashion. By way of comparison, consider how the New York Giants football team has to decide this weekend whether Eli Manning will be the starting QB for the rest of the season and who will be the General Manager and Coach. Some things you plan for, some things you have to deal with on the run, and some things you have to fudge.
(DOJ Press Release) Roman Valeryevich Seleznev aka Track2, Bulba and Ncux, 33, was to 168 months in prison for one count of participation in a racketeering enterprise pursuant to an indictment returned in the District of Nevada, and to 168 months in prison for one count of conspiracy to commit bank fraud, said sentences to run concurrently. Seleznev was also ordered to serve three years of supervised release and to make $50,893,166.35 and $2,178,349 in restitution. Seleznev is also a defendant in another federal wire fraud and computer hacking case. On Aug. 25, 2016, a federal jury convicted Seleznev of 38 counts related to his role in a scheme to hack into point-of-sale computers to steal and sell credit card numbers to the criminal underworld. On April 21, Seleznev was sentenced to 27 years in prison for those crimes.
Two Men Plead Guilty To Defrauding Investors Of Over $7 Million In Fuel Cell Company Investor Fraud Scheme (DOJ Press Release) George Doumanis and Emanuel Pantelakis along with their co-conspirator Danny Pratte, engaged in a scheme to defraud investors in the publicly traded company Terminus Energy, Inc. by inducing victims to invest in Terminus stock through material misrepresentations and omissions and by misappropriating investor funds for their own purposes.