Securities Industry Commentator by Bill Singer Esq

December 14, 2017

Justice Department Announces Charges and Guilty Pleas in Three Computer Crime Cases Involving Significant DDoS Attacks / Defendants Responsible for Creating "Mirai" and Clickfraud Botnets, Infecting Hundreds of Thousands of IoT Devices with Malicious Software (DOJ Press Release)
Paras Jha, Josiah White, and Dalton Norman pled guilty to criminal Informations charging them each with conspiracy to violate the Computer Fraud & Abuse Act in operating the Mirai Botnet, which in the summer and fall of 2016, targeted non-traditional computing devices that were connected to the Internet, including wireless cameras, routers, and digital video recorders.  At its peak, Mirai consisted of hundreds of thousands of compromised devices used to conduct distributed denial-of-service ("DDOS") attacks. READ the following FULL TEXT:
Jha Clickfraud Plea Agreement
Jha Mirai Plea Agreement
Norman Clickfraud Plea Agreement
Norman Mirai Plea Agreement
White Mirai Plea Agreement
Jha, Paras Information NJ
Jha, Paras Plea Agreement NJ
Jha Clickfraud Information
Jha Mirai Information
Norman Clickfraud Information
Norman Mirai Information

Jacksonville Man Pleads Guilty To Manufacturing And Possessing Counterfeit Federal Reserve Notes (DOJ Press Release) James Edward Langford, IV pled guilty to manufacturing and possessing counterfeit Federal Reserve notes and now faces a maximum penalty of 40 years in federal prison, forfeiture of the computer media used to manufacture the counterfeit notes, and payment of restitution. As set forth in part in the DOJ Press Release:
[O]n July 25, 2017, U.S. Secret Service agents surveilled the hotel room and observed Langford and two others leave the room. Langford and one of the individuals discarded full trash bags by the hotel's trash area. A search of the bags revealed several uncut sheets of wadded paper with printed images of counterfeit $20 bills.
Later that day, agents observed Langford leave the room and exit the hotel parking lot. Surveillance teams observed him driving erratically, cutting across three lanes of traffic, speeding, entering an intersection, and then making a sudden U-turn. Law enforcement initiated a traffic stop and during a search of Langford, multiple counterfeit $20 Federal Reserve notes were recovered from his wallet. A subsequent search of Langford's hotel room revealed numerous counterfeit notes and the computer media used to manufacture them, along with chemicals commonly used to remove the ink from genuine bills during the counterfeiting process.
Chicago Investment Manager Indicted on Federal Fraud Charges for Allegedly Swindling $10 Million from Clients and Lenders (DOJ Press Release) Investment manager Shawn Baldwin pleaded not guilty to a federal indictment asserting eight counts of wire fraud. READ the FULL-TEXT Indictment. As asserted in part in the DOJ Press Release:
[B]aldwin obtained funds from individual investors, as well as from corporate lenders who lent him money for use in business and personal dealings.  Baldwin claimed that compliance officers and professional advisors were affiliated with his firms, when, in fact, no such relationships existed, the indictment states.  Baldwin also deceived the investors and lenders by misrepresenting and minimizing the serious disciplinary actions taken against him by regulators, the indictment states.  The regulatory actions included the revocation of his certifications with the Financial Industry Regulatory Authority in 2009, and a permanent prohibition from offering securities sales or investment advice, which the State of Illinois imposed in 2013.
Baldwin attempted to conceal the scheme by furnishing victims with fraudulent account statements that misrepresented the value of their funds, the indictment states.  Baldwin also lulled his victims by falsely maintaining that he was working on lucrative business deals and developing new contacts that would lead to profits from initial public stock offerings, the indictment states.  In reality, Baldwin knew he could not pay back investors because he had lost or spent their money, the charges allege.
The FINRA Gestalt The word "gestalt" means something made of many parts but whose wholeness is more than or different from the mere sum of those parts. When it comes to the self regulation of Wall Street, the Financial Industry Regulatory Authority seems to have a penchant for gestalt. FINRA loves to knit together a number of seemingly harmless acts into a patchwork quilt that takes on the appearance of something more ominous. The parts add up to a violation even if each part, taken on its own, may not. Sometimes there is a compelling gestalt and FINRA's right. Other times, it's nonsense like that canvass in the modern art gallery that's been painted white and someone tells you it depicts man's inhumanity to man presented against a landscape of moral ambiguity . . . and it's yours for $3.5 million (will that be cash or check?). READ

Former Professional Football Player Sentenced to 40 Years for Running $10 Million Fraud (SEC Litigation Release 24009) 
Sherman C. Vaughn Jr., former Philadelphia Eagle Merrill Robertson Jr., and their company Cavalier Union Investments LLC, promised to invest in diversified holdings but diverted nearly $6 million of the more than $10 million they raised from investors to pay for personal expenses and used other funds to repay earlier investors. Both men were named in an SEC Complaint and in federal criminal charges. 
Robertson was convicted on August 24, 2017 and sentenced to 40 years in prison. Vaughn pled guilty and was also sentenced to 40 years in prison. The SEC's case was stayed pending the completion of Robertson's criminal trial but is now ongoing. READ the FULL TEXT SEC Complaint.