Securities Industry Commentator by Bill Singer Esq

October 23, 2018

The Blog will post
Guest Blogs 
Wednesday October 24th and Thursday October 25th 
from prominent industry lawyers 
Dochtor D. Kennedy, President & Founder, AdvisorLaw, LLC 
Aegis J. Frumento, Partner, Stern Tannenbaum & Bell
New York State Attorney General Barbara D. Underwood announced that Wells Fargo & Company will pay a $65 million penalty to settle allegations that the bank used fraudulent statements to investors in connection with its "cross-sell" business model, related sales practices, and the bank's publicly reported cross-sell metrics. The NYAG alleged that employees in Wells Fargo's Community Bank division engaged in fraudulent sales practices, including the opening of millions of fake deposit and credit card accounts without customers' knowledge that was fueled in part by pressure from significant incentive compensation program. Employees who met cross-selling targets were eligible for promotions and bonuses, while employees who did not meet the sales targets faced relentless pressure and even termination.
In today's featured FINRA arbitration, we got a widow. We got her deceased husband's two stockbroker brothers. We got about five brokerage accounts that have to be dealt with after the husband's death. We seem to have some bad feelings between at least one brother-in-law and the widow. All of which sets the stage for a delay in transferring some accounts. One question is whether said delay caused losses. The other question is whether the delay was more than an inconvenience and, perhaps, crossed over the line into a regulatory violation or worse.
In a Suspension Order, the SEC cites two August 2018 press releases issued by Nevada-based American Retail Group, Inc. (OTC: ARGB) a/k/a Simex, Inc. claiming that the company had partnered with an SEC-qualified custodian for use with cryptocurrency transactions that would be "under SEC Regulations," and that the company was conducting a token offering that was "officially registered in accordance [with] SEC requirements." READ the FULL TEXT SEC Order
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In a criminal Information filed in the United States District Court for the Southern District of Florida, former practicing securities lawyer Mark E. Fisher,and Joseph F. Capuozzo were charged with one count of conspiracy to commit securities fraud in connection with the alleged $1 million pump and dump securities fraud involving Valentine Beauty, Inc. ("VLBI"). Previously, Eddy Ubaldo Marin and Shane R. Spierdowis were charged with securities fraud offenses in connection with the same VLBI scheme. Marin pled guilty and was sentenced on September 5, 2018, to 210 months in prison; also, Spierdowis pled guilty is awaiting sentencing. Allegedly, Fisher executed various documents to facilitate the scheme, including certain legal opinion letters that falsely indicated that shares controlled by Marin and other conspirators, were not in fact owned or controlled by "affiliates" of the companies.  Such letters allowed shares of VLBI to be falsely classified as "free trading." Additionally, Fisher, Capuozzo and other conspirators knew that Marin was a convicted felon and attempted to conceal his role in the scheme by keeping his name off of corporate documents.   To facilitate the concealment of Marin's role, Capuozzo became the listed owner of an entity that held Marin's VLBI shares and traded the shares at the direction of Marin.  Capuozzo also served as the nominee Chief Exeuctive Officer of VLBI, while acting at the direction of Marin and the conspirators. Although Marin had begun a term of federal imprisonment in June 2014, Fisher, Capuozzo, Spierdowis, and others continued the stock manipulation scheme, while keeping a larger portion of the trading profits for themselves.  The conspirators continued to sell shares of VLBI, while continuing the same pattern of issuing press releases and engaging in coordinated sales of shares, until approximately Around April 26, 2016, trading in VLBI shares was suspended by the SEC, which filed parallel civil enforcement actions against Fisher, Capuozzo, Marin, and Spierdowis.

In the SEC action against Fisher and Capuozzo, they were charged with violating the registration provisions of Sections 5(a) and (c) of the Securities Act of 1933 and the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The SEC Complaint also charged Fisher with violating antifraud Rule 10b-5(b) of the Exchange Act. Fisher and Capuozzo agreed to settle the SEC's charges and be barred from the penny stock industry; and, additionally, Capuozzo agreed to be barred from serving as an officer or director of a public company. Finally, Fisher and Capuozzo are permanently enjoined  from violating the charged provisions of the federal securities laws READ the FULL TEXT SEC Complaint against Fisher and Capuozzo
In a criminal Complaint filed in the United States District Court for the Western District of Missouri, Ronayerin K. Ogolo was charged with one count of conspiracy to commit wire fraud in connection with his alleged role in a romance fraud. Since 2014, Ogolo has that targeted people, some of them elderly, via sites such as Facebook,, or, and obtained about $878,489 from his victims in the form of purported hospital fees, travel fees, ‘customs expenses,' ‘gold import taxes,' or investment opportunities. As set forth in part in the DOJ Release:

[O]ne victim (a widow in Indiana who received a friend request on Facebook) believed a co-conspirator was a widower working on an oil rig off the coast of Louisiana; she sent a total of $450,000 to Ogolor. Another victim in Texas, who believed a co-conspirator was a widower and U.S. Army general deployed in Afghanistan, lost at least $300,000. The affidavit also refers to victims in Alabama, Ohio, Washington, Arizona, Florida, Illinois, California, and Italy.
In a Complaint filed in the United States District Court for the District of New Jersey, the SEC charged investment advisor Bruce J. Fixelle, and two companies that he controlled: Genesis Advisory Service Corp. and Aurora Capital Management LLC, with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, as well as Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The Complaint alleges that Fixelle solicited investments for initial and secondary offerings from close friends he met through a local community organization. Allegedly, said offerings would be sold before the end of the trading day. The Complaint alleges that Fixelle converted investor money to pay mounting personal debt and personal expenses. In 2014, Fixelle and Genesis settled SEC charges of violations of Rule 105 of Regulation M via disgorgement, prejudgment interest, and civil penalties of over $1.5 million. READ the FULL TEXT Complaint
Former AXO Staff leasing Chief Financial Officer John Herzer pled guilty in the United States District Court for the Western District of Texas to willfully failing to pay over employment taxes to the Internal Revenue Service.  Herzer did not pay to the IRS AXO's employment tax withholdings and converted over $4.9 million of those funds for his own benefit including paying personal expenses and transferring millions of dollars to his own bank accounts.  In total, Herzer's fraudulent conduct caused a tax loss to the IRS of more than $13 million.
In a Complaint filed in the United States District Court for the Northern District of Georgia, it was alleged that Khoi Nguyen opened a fraudulent account online at BB&T Bank in the name of a victim; and, thereafter, he impersonated the victim during visits to a bank branch. At the time of his arrest, Nguyen possessed over $11,000 in cash, 20 iPhones bearing stickers denoting portions of phone numbers or complete phone numbers and/or initials, fraudulent Department of Defense identification documents with different names, various state driver's licenses containing Nguyen's photograph with different names, bank and debit cards in various names, gift cards with various institutions, and documents in the victim's name. Nguyen pled guilty to aggravated identity theft and was sentenced to two years in prison plus one year of supervised release, and ordered to pay $3,208.43 in restitution.