Securities Industry Commentator by Bill Singer Esq

December 13, 2018
Thomas Lanzana was charged in a criminal Complaint filed in the United States District Court for the District of New Jersey with one count each of wire fraud and commodities fraud. The Complaint alleges that  Lanzana fraudulently claimed that he was a successful Forex trader and solicited about $900,000 from at least 20 customers to invest in algorithm-based trading pools in foreign currency derivatives and other financial instruments. Allegedly, Lanzana misappropriated at least $350,000, using some to repay earlier investors in the manner of a Ponzi scheme, and to pay for his personal expenses, including purchases on Amazon, payments to a luxury car dealer and a jewelry retailer, and golf expenses. READ the Complaint'm a veteran securities lawyer who has spent years dealing with the SEC, both defending clients in enforcement actions and shepherding various ventures through the agency. I know enough to know that, with all the bullshit in Blockvest's whitepaper, the SEC just couldn't wait to burst in and rooster-block its ICO. So, of course the SEC sued for an injunction. Its case was simplicity itself: Blockvest admitted receiving money for its unregistered
Without admitting or denying the findings, dually registered investment adviser and broker-dealer Landaas & Company ("L&C") and its owner/Chairman Robert W. Landaas, agreed to settle SEC charges that L&C and Landaas violated the antifraud and compliance provisions of the federal securities laws. L&C willfully violated Sections 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 (Advisers Act) and Rule 206(4)-7 thereunder and Landaas willfully violated Section 206(2) and caused L&C's violations of Sections 206(4) and 207 and Rule 206(4)-7.  Also, L&C and Landaas were censured, required to retain and independent compliance consultant, establish a Fair Fund for victim compensation, and they consented to the entry of a cease-and-desist order requiring them to pay disgorgement and $468,941 in interest and  a $130,000 civil penalty. The Order alleged that L&C added a $20 "Service Charge"to client transactions for an unaffiliated third-party clearing broker's execution and clearing services, and L&C typically used a small portion of charge to pay the third-party broker, and the balance, which ranged from $3 to $20, was then credited to L&C, resulting in oer $320,000 in undisclosed credits. Also, L&C ailed to disclose over $80,000 in revenue sharing payments it received from the third-party broker based on investments L&C selected for its clients. READ the SEC Order
Former Neurendo Pharma LLC Chief Executive Officer Robert Tomlinson pled guilty to one count of wire fraud in the United States District Court for the Northern District of Illinois and was sentenced to four years in prison . Federal prosecutors alleged that Tomlinson fraudulently advised investors that their funds would be used to operate Neurendo and to market an experimental drug, known as GNTI, to treat type II diabetes; and that investors would receive a substantial payment once Neurendo's drug rights were purchased by a major pharmaceutical company.  In reality, Tomlinson used the majority of investor funds to support his family's lavish lifestyle, which included maintaining a personal property in Bay Harbor, Mich., and annual dues at the Bay Harbor Golf Club and Bay Harbor Yacht Club. Further, he misappropriated at least $100,000 in investor money to fund his own futures trading account, and $33,000 to make donations to the Washington National Cathedral.
Frank Gregory Cedeno pled guilty to conspiracy to commit wire fraud and conspiracy to commit money laundering in the United States District Court for the District of Massachusetts. Federal prosecutors alleged that Cedeno conspired with others to defraud victims by pretending to be employees of the SEC, and demanding money from victims. The funds were purportedly largely forwarded to individuals in the Dominican Republic. Co-conspirator Leonel Alexis Valerio Santana previously pled guilty and was sentenced to 63 months in prison, three years of supervised release, and ordered to pay $105,869 restitution. As set forth in part in the DOJ Release:

In one common version of the scam, victims received e-mails that used official-seeming documentation and the SEC seal to induce the victim to pay a fee in order to receive a portion of a legal settlement. In another version, victims received e-mails and official-seeming documents labeling the victim a defendant in a civil lawsuit, in which the victim owed tens of thousands of dollars in supposed disgorgement, penalties and fees. The documents gave the victim a choice of either appearing in court to contest the lawsuit or paying a smaller fee.

Options Trades in Away Account. In the Matter of Michael D. Jackson, Respondent (FINRA AWC  2017055684102, December 10, 2018). For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Michael D. Jackson submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Jackson entered the securities industry in 1996, and from 2009 to 2017, he associated with  FINRA member firm Securities America, Inc. FINRA imposed upon Jackson a $10,000 fine and a six-month suspension from associating with any member of FINRA in any capacity. As set forth in the AWC's "Overview":

Jackson recommended that a customer open an account away from Jackson's firm for the purpose of trading options. The customer agreed, and over the course of seven months Jackson placed orders for forty-two sets of options transactions in the customer's new account. Jackson did not contact the customer before placing any of those orders, nor did he provide requisite notice to either firm about his participation in those transactions. As a result of Jackson's trading, the customer lost virtually all of her money, partly due to the costs of the trades, which totaled more than 17% of the account's initial equity. As a result, Jackson violated FINRA Rules 2010, 2111, 2360, and 3280, and NASD Rules 2510 and 3050.

$116,000 in personal expenses submitted as business expenses. In the Matter of Thomas G. Cooper, Jr., Respondent (FINRA AWC 2016052530302, December 10, 2018). For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue,Thomas G. Cooper, Jr., submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Jackson entered the securities industry in 2005 as an unregistered investment banking analyst, first became registered in 2013, and in 2015, he was registered with FINRA member firm PricewaterhouseCoopers Corporate Finance LLC ("PWC" or the "Firm"), as an Investment Banking Representative, until his December 2016 discharge for having allegedly "submitted personal expenses as business expenses in violation of firm policy." FINRA imposed upon Cooper a Bar from associating with any FINRA member in any capacity. As set forth in the AWC's "Overview":

From September 2015 to October 2016 (the "Relevant Period"), while registered with PWC, Cooper submitted approximately 50 expense reports to the Firm in which he falsely characterized more than 1,300 of his personal expenses as having been incurred for business purposes. Cooper's submission of false expense reports caused the Firm to pay more than $116,000 for Cooper's personal expenses. By virtue of this conduct, Cooper converted Firm funds in violation of FINRA Rule 2010.
In response to a letter from the Securities Industry and Financial Markets Association requesting that the SEC Division of Trading and Markets extend the no-action relief currently in effect with respect to the reliance provisions of the customer identification program rule applicable to broker-dealers (the "CIP Rule") and the rule regarding beneficial ownership requirements for legal entity customers (the "Beneficial Ownership Rule"), the SEC published a No-Action Letter ("NAL"). In pertinent part, the SEC NAL advises SIFMA [Ed: footnotes omitted]:

Accordingly, the Division will not recommend enforcement action to the Commission under Exchange Act Rule 17a-8 if a broker-dealer treats an investment adviser as if it were subject to an AML Program Rule for the purposes of paragraph (a)(6) of the CIP Rule and/or paragraph (j) of the Beneficial Ownership Requirements, provided that the other provisions of the CIP Rule and the Beneficial Ownership Requirements, respectively, are met, and: (1) the broker-dealer's reliance on the investment adviser is reasonable under the circumstances, as discussed in more detail below; (2) the investment adviser is a U.S. investment adviser registered with the Commission under the Investment Advisers Act of 1940; and (3) the investment adviser enters into a contract with the broker-dealer in which the investment adviser agrees that: (a) it has implemented its own anti-money laundering program consistent with the requirements of 31 U.S.C. 5318(h) and will update such anti-money laundering program as necessary to implement changes in applicable laws and guidance, (b) it (or its agent) will perform the specified requirements of the broker-dealer's CIP and/or the broker-dealer's beneficial ownership procedures in a manner consistent with Section 326 of the USA PATRIOT Act and the Beneficial Ownership Requirements, respectively, (c) it will promptly disclose to the broker-dealer potentially suspicious or unusual activity detected as part of the CIP and/or beneficial ownership procedures being performed on the broker-dealer's behalf in order to enable the broker-dealer to file a Suspicious Activity Report, as appropriate based on the broker-dealer's judgment,5(d) it will certify annually to the broker-dealer that the representations in the reliance agreement remain accurate and that it is in compliance with such representations, and (e) it will promptly provide its books and records relating to its performance of the CIP and/or beneficial ownership procedures to the Commission, to a self-regulatory organization that has jurisdiction over the broker-dealer, or to authorized law enforcement agencies, either directly or through the broker-dealer, at the request of (i) the broker-dealer, (ii) the Commission, (iii) a self-regulatory organization that has jurisdiction over the broker-dealer, or (iv) an authorized law enforcement agency. . .