The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
February 25, 2019
Oh,yeah, sure, of course this email to me from the FBI is real -- I mean, c'mon, why would I ever doubt it? Obviously, FBI Director Wray has a Japanese email account and, similarly, why would I be suspicious about replying to him at his Top Secret/Secure personal Gmail account "Christopherwray1951@".
BUREAU INVESTIGATION DIVISION.Christopher WrayI am Christopher Wray an FBI director that has been delegated to investigate these fraudster who are in the business of swindling Foreigners that came for transaction in Nigeria and all over the world. Please be informed that during my investigation I got to find out that there is huge sum of $10.5million that has been assigned in your name (Beneficiary.) and these fraudster are busy swindling you without any hope of receiving your fund.We need to inform you that it has come to our notice and we have thoroughly Investigated with the help of our Intelligence Monitoring Network System and the (Interpol) that you are having an illegal Transaction with Impostors Claiming to be the Bank Governor in African, the CEO of Banks, General Manager Banks, FNB, Loto Officials, FIFA President,Chief Security Officer, Chief Financial Officer, Chief Communications Officer, Chief Operations Officer, Chief IT & T Officer, Chief Marketing and Commercial Officer.We have to inform you that we have made arrest in respect of this delayed overdue fund.our agent have a very limited time to stay in Nigeria so I advise you to respond to this mail immediately.I shall expect your response as soon as you receive this email. Please Note that I have attached my Identification to this email. do not inform any of the people that collected money from you before now about this new development, Till we finish our assignment.Note that the above fund have been cleared from terrorist or fraud related activities.contact me on this email:christopherwray1951@gmail.comawait your Response.Best Regard,Christopher Wray.BUREAU INVESTIGATION DIVISION.
Charles Schwab Sues Customers Over XIV Debit Balance (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4446/FINRA-XIV/
In today's featured FINRA arbitration, we have Charles Schwab winning its case against two public customers. Winning as in one customer is dead and the other is nowhere to be found. Hey, at least the lawyers get paid. Making matters worse, the lawsuit revolves around the much-maligned VelocityShares Daily Inverse VIX Short-Term Exchange Traded Note. Wow, that's a mouthful. Inverse as in what goes down, theoretically goes up. Theoretically as in, holy crap, are you going to be in for a nasty surprise. Exchange Traded Note as in ETN as in, whoa, that's not the same as an ETF, is it?
In the Matter of
Demitrios Hallas (SEC ALJ Initial Decision of Default;
Initial Decision Rel. No. 1358;Admin. Proc. File No. 3-18229 / February 22, 2019)
SEC ALJ James E. Grimes granted the SEC Division of Enforcement's Motion for Default and an Associational Bar with a broker, dealer, investment adviser, municipal securities
dealer, municipal advisor, transfer agent, or nationally recognized statistical
rating organization and from participating in an offering of penny stock. Respondent Hallas was registered with Santander Securities LLC from May 2013 to May 2014; Forefront Capital Markets LLC from August 2014 to July 2015; and PHX Financial, Inc. from August 2015 to November 2015. From March 2014 to May 2016, client Kevin Fahey gave Hallas
twelve checks totaling $170,750.17 (which was some 20-years of savings and constituted his sole retirement funds) with the understanding that Hallas would invest the money in Fahey's retirement account. In truth, Halls deposited the funds into his personal account and then used the money for personal expenses. Hallas asserted that Fahey had given him a "personal loan," and it was his intention to repay that via monthly payments. As set forth in pertinent parts in the Initial Decision [Ed: footnotes omitted:]
Hallas recommended and executed trades in unsuitable investments for five customers, including Fahey. The unsuitable investments were in daily leveraged exchange traded funds and exchange traded notes. These complex products are highly volatile and have significant risk. The prospectus for one of these funds states, in bold type, that it "seeks daily inverse leveraged investment results and does not seek to achieve its stated investment objective over a period of time greater than one day." Accordingly, this investment "is different and much riskier than most exchange-traded funds" and is designed for use by "knowledgeable investors" who understand the risks involved and actively manage their portfolios. Hallas's customers were not sophisticated investors. They told the Division that Hallas made all of the investment decisions and did not explain leveraged exchange traded products or the risks involved in those investments.Although these daily leveraged investments were intended to be held for one day or less, Hallas held some positions for weeks at a time. From September 2014 to October 2016, Hallas executed at least 172 purchases of daily leveraged investments. Of these, at least 100 were held for more than one day. When asked why a particular fund was held for nearly a month, Hallas said he was "[n]ot really sure" and speculated that "[m]aybe [he] was on vacation or something." Hallas also acknowledged making excessive trades in his clients' accounts to generate more commissions.
In 2014, without admitting or denying the allegations, Hallas settled a FINRA Complaint and was fined $5,000; ordered to pay $6,110 restitution, and suspended for 30-days. FINRA Department of Enforcement, Complainant, v. Demitrios Hallas, Respondent (FINRA Office of Hearing Officers Order Accepting Offer of Settlement; Disc. Proc. No. 201203949701/ June 23, 2014)
http://www.finra.org/sites/default/files/fda_documents/2012031943701_FDA_D832425.pdf As set forth in the "Summary" to the FINRA OHO Order:
http://www.finra.org/sites/default/files/fda_documents/2012031943701_FDA_D832425.pdf As set forth in the "Summary" to the FINRA OHO Order:
In August and September 2011, Respondent Demitrios Hallas recommended that two customers liquidate their investments and invest the proceeds in mutual funds. Hallas had no reasonable basis for recommending these investment switches, which caused the customers to incur unnecessary extra fees and charges. The investment switches were not suitable for the customers' financial circumstances and needs. By recommending securities transactions without a reasonable basis, and consequently recommending unsuitable investment switches, Hallas violated NASD Rule 2310 and FINRA Rule 2010.
In 2017, FINRA filed another Complaint against Hallas, who defaulted and was barred in all capacities. FINRA Department of Enforcement, Complainant, v. Demitrios Hallas, Respondent (FINRA Office of Hearing Officers Default Decision; Disc. Proc. No. 2015047828802/ November 2, 2017)
https://www.finra.org/sites/default/files/fda_documents/2015047828802
%20DEMITRIOS%20HALLAS%20CRD%204199832%20OHO%20JM.pdf%20REDACTED.pdf
https://www.finra.org/sites/default/files/fda_documents/2015047828802
%20DEMITRIOS%20HALLAS%20CRD%204199832%20OHO%20JM.pdf%20REDACTED.pdf
In April 2017, the SEC filed a civil Complaint against Hallas in the United States District Court for the Southern District of New York alleging that he had unreasonably enaged in daily-leveraged-products transactions and had misappropriated $170,750 from a client. On September 27, 2017, the Court entered a corrected Default Judgment permanently enjoining Hallas from violating Section 17(a), Section 10(b), and Rule 10b-5
and imposed a civil penalty of $260,193.39, an equal amount of disgorgement,
and prejudgment interest.
In 2018, Hallas was charged in the Superior Court of Westchester
County, New York, with felony grand larceny in the third degree; and on October 24, 2018, he pled guilty. Hallas will be sentenced to interim
probation for one year to be followed by an additional four years of
probation; and will be ordered to pay restitution to Fahey.
https://www.sec.gov/litigation/litreleases/2019/lr24408.htm
In a Complaint filed in the United States District Court for the District of Massachusetts, the SEC alleged that former investment adviser James S. Polese and his former colleague, Cornelius Peterson, with securities fraud for engaging in various schemes to defraud their clients, including fraudulently misappropriating $350,000 of one client's money, using $100,000 of those funds to make investments in their own names, and directing the remaining $250,000 to Polese's personal bank account. Also, the Complaint alleged that Polese and Peterson invested $100,000 of another client's funds into an investment in which Peterson and Polese held a financial interest, without disclosing their conflict of interest.In accordance with the entry of final judgment, Polese agreed to disgorge $307,300 in ill-gotten gains and pay prejudgment interest of $35,276. In addition to ordering this monetary relief, the final judgment enjoins Polese from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and 206(2) of the Investment Advisers Act of 1940, as well as aiding and abetting any investment adviser's violations of the books and records provisions of Section 204 of the Investment Advisers Act and Rule 204-2 thereunder. The monetary judgment will be deemed satisfied by the $355,000 of restitution that Polese was ordered to pay in connection with a parallel criminal action brought by the U.S. Attorney's Office for the District of Massachusetts, in which Polese pleaded guilty to conspiracy, securities fraud, aggravated identity theft, and bank fraud, and was also sentenced to sixty months imprisonment. The Commission has also entered an order barring Polese from associating with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any offering of a penny stock.
https://www.justice.gov/usao-sdny/pr/stock-broker-sentenced-prison-insider-trading-scheme-based-confidential-informationFlorida Man Sentenced To One Year In Prison For Insider Trading Scheme
In an Indictment filed in the United States District Court for the Southern District of New York, Roberto Rodriguez, Michael Siva, Rodolfo Sablon, Jhonatan Zoquier, and Jeffrey Rogiers were charged in a 54-count Indictment for their involvement in three overlapping insider trading schemes utilizing information misappropriated by Daniel Rivas, a technology consultant in an investment bank's Research and Capital Markets Technology Group. Rivas and an additional participant, James Moodhe, pled guilty and cooperated in the ensuing investigation; and, thereafter, all defendants pled guilty. Rodriguez pled guilty to one count of conspiracy to commit securities fraud and fraud, and he was sentenced to one year and one day in prison plus two years of supervised release.
Former stockbroker Siva pled guilty to one count of conspiracy to commit securities fraud and fraud and was sentenced to 18 months in prison plus two years of supervised release and ordered to forfeit $35,000. As set forth in part in the DOJ Release:
From August 2014 through April 2017, Rivas violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank's Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades. On more than 50 occasions between August 2014 and April 2017, Rivas provided Inside Information about contemplated but unannounced merger and acquisition transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities. In total, the insider trading based on Inside Information misappropriated by Rivas resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.. . .SIVA was a member of the first of three tipping chains outlined in the Indictment. In this tipping chain, Rivas passed inside information to Moodhe, the father of the woman with whom Rivas was living and dating. Moodhe then passed the inside information to SIVA, a broker and financial adviser at a global investment bank headquartered in Manhattan, New York. Moodhe and SIVA had known each other for more than a decade and SIVA also became Moodhe's broker.. . .In total, between 2015 and 2017 SIVA and Moodhe used Inside Information Rivas provided to trade ahead of the public announcements of more than two dozen transactions, including numerous tender offers, allowing SIVA and Moodhe to generate illicit profits in excess of $3 million. SIVA also earned thousands of dollars in commissions on the illegal trades entered on behalf of his clients.