The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

July 20, 2018

SEC Charges Cape Cod-Based Investment Adviser with Fraud (SEC Litigation Release No. 24208)
https://www.sec.gov/litigation/litreleases/2018/lr24208.htm 
The SEC filed a Complaint in the United States District Court for the District of Massachusetts charging investment adviser Kimberly Pine Kitts with having engaged in a six-year scheme to steal money from client accounts by forging client signatures on withdrawal requests from variable annuities, forging client signatures to wire funds from client brokerage accounts, and misleading clients into withdrawing funds to make fake tax payments. The Complaint alleged that Kitts stole over $3 million via 82 unauthorized withdrawals from seven clients, and then tried to conceal her fraud through falsified account statements and other documentation. Kitts purportedly used the money she stole for personal expenses, including paying for vacations and several luxury vehicles.READ the FULL TEXT Complaint 
https://www.sec.gov/litigation/complaints/2018/comp24208.pdf

https://www.cftc.gov/PressRoom/PressReleases/7758-18
The United States District Court for the District of Columbia issued an Opinion and Order (Order) against Defendants Intrade The Prediction Market Limited (Intrade) and Trade Exchange Network Limited (TEN) requiring them to pay, jointly and severally, a $3 million civil monetary penalty for violations of the Commodity Exchange Act (CEA) and CFTC Regulations. The Court had previously granted CFTC summary judgment on two counts of a 2012  Complaint filed against Intrade and TEN. The Court found that TEN and Intrade had permitted U.S. customers to trade 5,503 binary option contracts involving CFTC-regulated commodities from September 2007 through June 25, 2012 in violation of the CFTC's ban on off-exchange options trading.  The Court also found that TEN violated a 2005 Cease and Desist Order that the CFTC issued against TEN for similar conduct.
READ the FULL TEXT:

https://www.cftc.gov/sites/default/files/2018-07/enfintradepredictionmarketltdexchangenetworkconsentorder030916.pdf

https://www.cftc.gov/sites/default/files/2018-07/enfintradepredictionmarketltdexchangenetworksummaryjudmentorder080315.pdf

https://www.cftc.gov/sites/default/files/2018-07/enfintradepredictionmarketltdexchangenetworkmemorandumopinion070518.pdf

http://www.brokeandbroker.com/4087/finra-arbitration-dormant/
An angry Morgan Stanley customer had what he deemed a dormant account. They didn't give me any advice for 16 years, he complained. But they sure as hell racked up charges for doing nothing, he fumed. All of which prompted him to file a FINRA arbitration seeking damages. The litigation cards get the old Wall Street shuffle. Place your bets on the customer, the broker-dealer, and the stockbroker.

In response to a CFTC Complaint, the United States District Court for the District of Utah entered an Order for Final Judgment by Default against Tallinex, a/k/a Tallinex, Ltd. (Tallinex), an Estonian company that was licensed to do business in St. Vincent and the Grenadines.  The Default Order found that Tallinex operated as an unregistered foreign exchange dealer soliciting or accepting orders for leveraged or margined forex transactions from retail U.S. customers, and offered to be or was the counterparty to such contracts with its customers. Tallinex falsely represented that it was lawfully doing business in the United States, that customer funds were segregated and protected, and that forex investments made with it were likely to be profitable so that it could increase its number of customer accounts. The Default Order requires Tallinex to pay $10,289,391 in restitution to U.S. customers and a civil penalty of $681,888; and permanently prohibits Tallinex from violating the Commodity Exchange Act, as charged. 

Additionally, the Court entered a Consent Order against General Trader Fulfillment (GTF), which was in the business of providing forex trading instruction and at least one of the firm's paid "coaches" introduced U.S. customers who were not eligible contract participants, to Tallinex for the purposes of opening and maintaining individual forex trading accounts and participating in off-exchange retail forex transactions at Tallinex -- which constituted GTF acting as an unregistered introducing broker. The Consent Order requires GTF to pay an $85,000 civil monetary penalty and permanently prohibits GTF from violating the CEA, as charged. READ the FULL TEXT: 

https://www.cftc.gov/sites/default/files/2018-07/enfTallinexdefaultjudgement07092018.pdf

https://www.cftc.gov/sites/default/files/2018-07/enffulfillmentconsentorder062618_0.pdf

SEC Charges Officers of Florida Battery Company with Securities Fraud (SEC Litigation Release 24207)
https://www.sec.gov/litigation/litreleases/2018/lr24207.htm 
In a Complaint filed in the United States District Court for the Middle District of Florida, the SEC alleged that the defunct  Oakridge Global Energy Solutions, Inc.'s former CEO Stephen J. Barber made false and misleading statements in six press releases concerning Oakridge's signed agreements to supply battery systems to Maritime Tactical Systems, Inc. and Freedome Motores, LLC; and that former President Lee Larry Arrowood substantially assisted Barber with drafting those knowingly false press releases. The SEC alleges that Oakridge had only provided test batteries to those companies for their consideration for possible future orders. Further, the SEC alleged that Barber and Arrowood misrepresented that Oakridge had received $250,000 in "immediate booked orders" and more than $20 million in "follow on commitments" for its "state-of-the-art" lithium golf cart batteries, and had "existing pipeline orders" of $24 million for its batteries. Arrowood has consented to the entry of a final judgment permanently enjoining him from future violations of Exchange Act Section 10(b) and Rule 10b-5, barring him from serving as an officer or director of a public company, and ordering him to pay a civil penalty of $50,000. READ FULL TEXT SEC Complaint 
https://www.sec.gov/litigation/complaints/2018/comp24207.pdf

SEC Charges Wyoming Man for Offering Fraud Targeting Elderly Ministry Members (SEC Litigation Release No. 24211) https://www.sec.gov/litigation/litreleases/2018/lr24211.htm
In a Complaint filed in the United States District Court for the District of Wyoming, the SEC alleged that Edward A. Young and his wholly-owned entity Guardians Trustee, LLC with fraudulently raising money from members of an online ministry lby promising returns of 400% through operation of a purported private banking facility and assuring that funds would be indemnified against loss. The Complaint asserts that the defendants misappropriated investor funds to pay for Young's personal expenses, another individual's child support, and start-up costs for an unrelated entity.  Further, defendants allegedly failed to disclose prior orders against Young for securities fraud and criminal theft. Investors allegedly lost all of their invested funds. Without admitting or denying the allegations, Young and Guardians Trustee  agreed to pay, jointly and severally, disgorgement of $170,000 and prejudgment interest of $9,253, and to be enjoined from future securities laws violations.  Young has also agreed to be enjoined from participating in the issuance, purchase, offer, or sale of any securities, other than trading in his personal account.  READ the FULL TEXT Complaint 
https://www.sec.gov/litigation/complaints/2018/comp24211.pdf

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