(SEC Press Release 2017-235) According to an SEC Complaint filed in the United States District Court for the Southern District of Florida, Robert H. Shapiro and a group of unregistered investment companies called the Woodbridge Group of Companies LLC engaged in a $1.2 billion Ponzi scheme that defrauded over 8,400 investors, many of them senior citizens. READ the FULL TEXT SEC Complaint.
FINRA Fines Raymond James Financial Services, Inc. $2 Million for Failing to Reasonably Supervise Email Communications (FINRA Press Release) The Financial Industry Regulatory Authority imposed a $2 million fine on member firm Raymond James Financial Services for its alleged failure to maintain reasonably designed supervisory systems and procedures for reviewing email communications. READ the FULL TEXT Acceptance, Waiver and Consent settlement agreement
Has FINRA Just Threatened To Shut Down Wall Street's Fantasy Leagues And Office Sports Pools? (BrokeAndBroker.com Blog) A recent FINRA regulatory settlement troubles and angers BrokeAndBroker.com Blog publisher Bill Singer, Esq. FINRA is so intent on ringing up the cash register for fines and sending some small fry to the penalty box that the self-regulator fails to see that hundreds of thousands of industry employee who are in a fantasy sports league or who make a weekly wager on sports are technically in violation of one of FINRA's most frequently enforced rules. Among Bill's choice words for FINRA this featured settlement are hypocritical, asinine, inane, moronic, stupid, pandering, insincere, sanctimonious, self-righteous; specious, spurious, and glib.
Investment Adviser Charged with Running Ponzi Scheme (SEC Litigation Release 24019) In a Complaint filed in federal court, the SEC alleged that Stephen C. Peters, through his investment adviser firm VisionQuest Wealth Management, sold promissory notes issued by another one of his companies, VisionQuest Capital, to clients and other prospective investors while making false statements, including that proceeds would be invested into revenue-producing businesses with neither Peters nor his businesses receiving compensation. Peters allegedly claimed that the VisionQuest Capital notes presented little or no risk of loss and were "guaranteed." READ the FULL TEXT Complaint.
(DOJ Press Release) In connection with their roles with two multi-million dollar prize promotion scams that defrauded many elderly victims out of over $20 million, Glen Burke and Michael Rossi entered guilty pleas in federal court. Previously, Burke had been subject to a 1998 court order in which the Federal Trade Commission had him permanently banned from telemarketing and making misrepresentations to consumers.
Former Chief Financial Officer at Publicly Traded Company Charged with Accounting and Securities Fraud Scheme (DOJ Press Release) Edward J. DiMaria, former chief financial officer for Bankrate Inc., a publicly traded financial services and marketing company, was charged in a federal Indictment. READ the FULL TEXT INDICTMENT The indictment alleges that between 2011 and 2014, DiMaria and his co-conspirators carried out a complex scheme to manipulate Bankrate's financial statements and artificially inflate Bankrate's earnings. According to the indictment, DiMaria and his co-conspirators allegedly engaged in so-called "cookie jar" or "cushion" accounting where over a million dollars in unsupported expense accruals were left on Bankrate's books and then selectively reversed in later quarters to meet earnings goals. In addition, DiMaria and his co-conspirators allegedly misrepresented certain company expenses as "deal costs" in order to artificially inflate publicly reported adjusted earnings metrics, and made materially false statements to conceal the improper accounting entries from Bankrate's auditors, shareholders and the investing public. The indictment further alleges that while Mr. DiMaria was misleading Bankrate's auditors and the public about the company's financial condition he realized millions of dollars from selling his own shares of Bankrate stock.
Arbitrators OK Raymond James Liquidation Of JTWROS Account For Broker Husband's Loan (BrokeAndBroker.com Blog) Today's BrokeAndBroker.com Blog deals with unanswered questions. We start with a fairly straightforward proposition of Raymond James wanting to be repaid the remaining balance on a loan it made to a former associated person. Fair enough. On the other hand, it seems that Raymond James is holding on for dear life to the former associated person's Joint Tenants With Right of Survivorship account, in which his wife is the other tenant. In filing its lawsuit, Raymond James named the husband as a Respondent and also named the wife as a Respondent. The wife refused to submit to FINRA arbitration. Now what? Can Raymond James essentially seize the assets in the JTWROS to satisfy the husband's debt if the wife is not subject to FINRA arbitration jurisdiction? Also, how come the wife isn't subject to FINRA jurisdiction? READ http://www.brokeandbroker.com/3733/raymond-james-jtwros/
Federal Court Orders Florida-based Mintco LLC and its Owners, Stuart Rubin and Richard Zimmerman, to Pay $340,000 in Civil Monetary Penalties for Engaging in Illegal Off-Exchange Precious Metals Transactions (CFTC Press Release) In connection with findings that Defendants had engaged in illegal off-exchange precious metals transactions and that the two individuals had also engaged in fraud, the CFTC obtained Consent Orders of Permanent Injunction against Defendants Mintco LLC and its owners Stuart Rubin and Richard Q. Zimmerman. Mintco is ordered to pay a $250,000 civil monetary penalty. Rubin and Zimmerman are each ordered to pay separate $45,000 civil monetary penalties. The three Defendants are prohibited from engaging in illegal, off-exchange precious metals transactions. A three-year trading and permanent registration ban is imposed on Rubin. In the event that Zimmerman seeks to become a CFTC-registered principal, he is required to provide pre-review promotional materials to the National Futures Association. The Orders also permanently prohibit the three Defendants from engaging in illegal, off-exchange precious metals transactions.
Bitcoin Promoter USI-Tech Hit With Emergency Order (Texas Securities Board Press Release) The Texas Securities Board entered an Emergency Cease and Desist Order against USI-Tech Limited, an overseas firm that is promising low-risk, triple-digit returns from investments tied to Bitcoin mining via Craiglist, YouTube, and other Internet activities. READ the FULL TEXT CFTC ORDER
SEC Obtains Final Judgment Against Investment Adviser, Its Principal and Associate Who Boasted Phony Assets and Track Record (SEC Litigation Release 24018) In Securities and Exchange Commission v. Matrix Capital Markets, LLC, Nicholas M. Mitsakos and Courtlin L. Holt-Nguyen (SDNY, 16-CV-06395) the SEC charged Defendants with pretending to manage millions of dollars in assets and fabricating a hypothetical portfolio of investments that purportedly earned returns of 20 to 66 percent. According to the SEC's complaint, Mitsakos and Matrix then stole money from the first client who invested with them based on their misrepresentations. SDNY entered final judgments permanently enjoining Matrix, Mitsakos and Holt-Nguyen from further violations and ordered them to pay disgorgement of $861,163.62 plus $57,474.30 prejudgment interest. The court also imposed an officer and director bar against Mitsakos and ordered Holt-Nguyen to pay a $25,000 civil penalty. In separate administrative proceedings, Mitsakos agreed to be barred from the securities industry and from participating in penny stock offerings; Matrix agreed to be censured; Holt-Nguyen agreed to an industry bar with the right to apply for reentry after three years, but which permits him to continue his current employment with an investment adviser, limiting him to providing only information technology and administrative functions. In a parallel criminal action based on the same conduct, Mitsakos was sentenced to a prison term of 30 months and was ordered to pay $861,163.62 in restitution and $861,163.62 in forfeiture.
http://levan.legal/jon-jorge-aras/ Up and coming securities-industry lawyer Jon-Jorge Aras has joined prominent industry lawyer Richard Levan at Levan Legal, LLC http://levan.legal/about/. Aras represents securities industry professionals and firms in enforcement actions and investigations initiated by the United States Securities and Exchange Commission and FINRA, among others. Aras litigates in federal and state court, administrative forums and in arbitration and mediation settings. Aras can be reached at firstname.lastname@example.org or by phone at 484-431-0250.
Second Circuit Reinstates BATS HFT Class Action (BrokeAndBroker.com Blog)
After Michael Lewis published "Flash Boys," the world awoke to a very dire picture of high frequency trading ("HFT") and its corrosive and corrupting influences on the so-called level playing field that Wall Street so dearly wants to market to the public. The fact is -- and this is coming from a 35-year industry veteran -- there has never been a level playing field in the financial markets. They want you to believe that fairy tale. You may actually believe it. But the truth is that the cards are often marked, the wheels are rigged, the dice loaded, and the House retains the odds (and, yes, there are more than a few professional cheaters who make a nice living operating on the fringe). Sorry to burst your bubble. All of which set the stage for the filing of a number of lawsuits about the fraud perpetrated via HFT and how more than a handful of self-regulatory organizations ("SROs") seemed to have either looked askance or, worse, engaged in complicit behavior.
Broker Charged With Giving Special Access to IPOs for Cash Kickbacks (SEC Release) The Securities and Exchange Commission today charged Brian Hirsch with subverting allocation policies and procedures at two brokerage firms where he worked on the wealth syndicate desk. The U.S. Attorney's Office for the District of New Jersey has filed parallel criminal charges against Hirsch. Also charged in the SEC's Complaint is Hirsch's customer Joseph Spera, who allegedly made approximately $4 million in trading profits on the offering allocations he received from Hirsch. Spera allegedly paid Hirsch approximately $1 million in cash. READ the FULL TEXT SEC COMPLAINT
Georgia Real Estate
Investor Sentenced to 16 Months in Prison for Bid Rigging and Bank Fraud at
Public Foreclosure Auctions
https://www.justice.gov/opa/pr/georgia-real-estate-investor-sentenced-16-months-prison-bid-rigging-and-bank-fraud-public After a two-week federal trial, Douglas L. Purdy was convicted of bid rigging and two counts of bank fraud. Purdy was sentenced to 16 months in prison with three years supervised release, and ordered pay $81,979.86 in restitution to victims. Purdy and his co-conspirators agreed to not to compete for residential real estate at foreclosure auctions in Forsyth County, Georgia and defrauded lender banks and homeowners via such activity as secret "second auctions" of properties, dividing among themselves the auction proceeds that should have gone to pay off debt vs against the properties and, in some cases, to homeowners.
(Opinion, United States Court of Appeals For the Second Circuit, No. 15‐3057-CV; December 19, 2017). The Second Circuit vacates lower court and finds that plaintiffs sufficiently pled that several national securities exchanges engaged in manipulative or deceptive conduct in connection with certain products and services that the exchanges sold to high‐frequency trading firms, which purportedly created a two‐tiered system that favored those firms at the plaintiffs' expense.
PIABA: NON-ATTORNEY REPRESENTATIVES ARE REAL AND GROWING "MENACE TO INVESTORS" IN FINRA ARBITRATION / NAR Firms Found to Include Individual Who Pled Guilty in Insurance Scheme and Brokers Barred from Industry; Unwary Investors Have None of the Protections of Dealing with Attorneys and Often Recover Little of Lost Funds. (PIABA Press Release) READ FULL TEXT PIABA NAR REPORT
Three Major New York Diagnostic Testing Facility Owners Charged for Their Roles in Alleged Multi-Million Dollar Health Care Fraud Scheme (DOJ Press Release) Tea Kaganovich and Ramazi Mitaishvili ( the co-owners of Sophisticated Imaging, East Coast Diagnostics, East Shore Diagnostics, East West Management and RM Global) and Syora Iskanderova aka Samira Sanders (the owner of Global Testing, Liberty Mobile Imaging, Liberty Mobile Testing, Med Tech Services and Scanwell Diagnostics) were each indicted on one count of health care fraud, two counts of making false claims to a federal agency, one count of conspiracy to pay health care kickbacks, two counts of paying health care kickbacks and four counts of money laundering. Kaganovich and Mitaishvili were also charged with one count of conspiracy to defraud the United States by obstructing the lawful functions of the IRS. Iskanderova was also charged with two counts of making false statements to federal agents.
A Little Bit Of FINRA Hypocrisy For $20,000 http://www.brokeandbroker.com/3729/finra-email-awc/ (BrokeAndBroker.com Blog) The laws of physics don't always apply to the regulation of Wall Street. Sometimes, things appear out of thin air and exist but then suddenly don't but then, just as mystifying, return to our realm of existence . . . or do they? The one constant throughout this metaphysical setting is that the Financial Industry Regulatory Authority stands ready to impose fines. In a recent regulatory settlement, FINRA seems to suggest that one of its small member firms had written supervisory procedures but, then again, didn't, or, perhaps put another way, maybe those procedures existed but were never fully compliant, but, on the other hand, those procedures were compliant when first approved but lapsed into non-compliance, but, oddly, it's not clear as to when things went from compliant to non-compliant but, hey, a $20,000 fine should stop you from asking more questions. Welcome to the world of hypocrisy.
SEC Obtains Final Judgment Against Former Boiler Room Operator (SEC Litigation Release) The SEC obtained a judgment in Securities and Exchange Commission v. Jason A. Wallace, (16-CV-01788 ; C.D. Cal.) , permanently enjoining Jason A. Wallace, barring him from participating in any offering of a penny stock, and ordering him to pay $512,048.80 in disgorgement and prejudgment interest plus a $434,887.07 civil penalty. The SEC Litigation Release characterizes Wallace as a "former boiler room operator charged with participating in a fraudulent scheme to artificially inflate the per share price of penny stocks.
(DOJ Press Release) Ezra Chowaiki was charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carries a maximum potential sentence of 20 years in prison, and one count of interstate transportation of stolen goods, which carries a maximum potential sentence of 10 years in prison. READ the FULL TEXT Criminal Complaint
Investment Fund Manager Sentenced in Brooklyn Federal Court to 55 Months' Imprisonment for Orchestrating Multi-Million Dollar Fraud Schemes / Defendant Used Investors' Money to Pay for Outside Business Ventures and Personal Expenses (DOJ Press Release) After pleading guilty to two counts of securities fraud in connection with two separate schemes, John R. Lakian, a manager of Capital L Financial Group, LLC (Capital L) and Aegis Capital Fund, LLC (Aegis Capital Fund), was sentenced to 55 months' imprisonment and ordered to pay $15,640,582.46 restitution. In February 2016, Lakian's co-defendant, Diane Lamm, pleaded guilty and is awaiting sentencing in January 2018.
Victim Blamed For Victimizing Victimizers In ATM Federal Appeal (BrokeAndBroker.com Blog) Walking up to an ATM machine reminds me of the harrowing scene in the movie "Marathon Man," when Laurence Olivier asks Dustin Hoffman: "Is it safe?" From the second I place my bank card into the reader, I imagine all sorts of things that are unsafe about the transaction. There could be a skimmer on the ATM. Someone could be across the street with a telescope trying to steal my password. The machine may be broken and I will be charged for cash that I never got. My credit card may get stuck in the reader and I can't retrieve it. That guy standing at the other machine may pull out a gun and steal my money. Other than that, what's to worry about? In today's BrokeAndBroker.com Blog we present the fascinating case of two ATM programmers who rigged the machines to become very friendly piggy-banks. Not so much a Christmas layaway as a takeaway but, these days, it's about as uplifting a Christmas tale as your gonna get.
SEC Charges Former Employee and Friend with Insider Trading in Securities of International Rectifier Corporation (SEC Litigation Release 24015) In Securities and Exchange Commission v. Lanny Brown, et al., (Complaint, United States District Court for the District of Arizona, 17-CV-04630), the SEC charged Defendants Brown and Fox with violating Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The defendants consented to a permanent injunction and are ordered to pay jointly and severally, $369,720 disgorgement with $43,147.79 prejudgment interest with a credit for the monetary amount they have agreed to pay in a parallel criminal case. READ the FULL TEXT SEC Complaint.