Securities Industry Commentator by Bill Singer Esq

April 2, 2019

Mick Jagger to Undergo Heart Valve Replacement Surgery
Mick Jagger is 75 and in need of a heart valve replacement? No way. Wasn't it only yesterday that he had a heart of stone? Alas, in the end, the only things left on Earth will be cockroaches and Keith Richards.

Lights! Camera!! Action!!! Hollywood Comes to the SEC!!! 
SEC Chair Jay Clayton offers the first of several videos in a new series, "Notes from the Chairman." Also, the SEC's Office of Investor Education and Advocacy offers an Investor's Preparadeness checklist
Bill Singer's Comment: I thought this SEC Press Release was an April Fool's joke. The federal securities regulator issued a full-blown SEC Press Release heralding how the SEC's Office of Investor Education and Advocacy, which has its own acronym of OIEA, had posted a checklist, as in a checklist that had fewer words on it than the SEC Press Release's discussion of the OIEA checklist, and, wow, there was also embedded in the SEC Press Release another release heralding the release of several videos hosted by SEC Chair Clayton, Seriously, don't they got better things to do over at the SEC than film videos? Was it a slow news day for the SEC? Maybe the SEC had run out of applications by Whistleblowers to deny?

Speaking of Regulators Who Seem to Have A Lot of Time On Their Hands:
April is the kickoff for Financial Literacy Month! WOW!!!!  The FINRA Investor Education Foundation and the American Library Association announced the selection of 50 U.S. public libraries to be part of a national tour of the traveling exhibition: "Thinking Money for Kids." Yes, I know, you boys and girls can't wait to visit this interactive exhibit which will help you:

understand what money is, its function in society, money choices, and money values, such as fairness, responsibility and charitableness. The initiative was inspired by the success of the popular, Thinking Money, a traveling financial literacy exhibit targeting tweens and teens, launched in 2016.

A Word From Your Wall Street Uncle Bill: Hey kids, I'm sorry, but some adults, who probably should know better, think that "Charitableness" is a real word. No, there's really no such word: It's another dumbass thing thought up by dumbass adults who think that tweens want to be called tweens, and that teens are going to be excited about anything marketed to them as a "traveling financial literacy exhibit." The way your Wall Street Uncle Bill would explain finance to you is that there are big banks that get their money from evicting your mom and dad from their home and repossessing your family's car at night while you're all sleeping. That's what mommy and daddy meant when they said the bank took everything. That's why daddy fired off a shotgun on Christmas Eve and told you that Santa Claus had committed suicide, and how mommy tried to convince you that was the reason why you weren't getting any presents last year. What do the banks do with all that money? Oh, they lend the money at exorbitant rates to the mean owners of the circus, where all the cute animals are chained and beaten. If you want to help mom and dad, you should feed the cute elephant with the large ears a lot of fiber so that it will shit all over the bank when it flies over the building, which would be funny, right? By the way, here's a clip of a flying baby elephant, who is under contract to a large, international conglomerate, which is dependent upon the lack of charitableness of large banks for its financing, and has paid off all the local politicians to get variances so that the circus could dump animal waste all over the county fairground and your adjoining schoolyard:
Economists define the Great Recession has having started in December 2007 and ended in June 2009. That 2009 terminus may well be justified by statistics, but for those who lived through that period of economic devastation, the after-effects continued into 2011, and for many, well into 2014. The psychological impact of the economic crisis is still felt today. Look at a chart of most stock indices from 2009 to 2019 and it's almost a vertical line up with a few hiccups along the way. On the other hand, the 10-Year Treasury chart is less rewarding -- in January 2009, the rate was about 2.25% but by April 2019, the rate was only 2.49%. So . . . what happens when you stand atop that high perch of 2019 and look back to 2013/2014, when you ventured back into the stock and bond markets? Are you now angry with your stockbroker, who took you at your word that you wanted to be "conservative?" Are you at peace with your decision to reduce your speculation notwithstanding that you might have achieved better results? Do you wish you had allocated more assets to stocks and fewer to bonds? A recent FINRA public customer arbitration against Morgan Stanley and two stockbrokers explores whether the cause of a purportedly "under-productive" brokerage account was a conservative strategy that was too conservative?

FINRA Fines and Suspends Rep for Altered Car Service Receipts. In the Matter of Prabir Purohit, Respondent (FINRA AWC 2018058000401)
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, Prabir Purohit submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In accordance with the terms of the AWC, FINRA imposed upon Prabir Purohit a $10,000 fine and a one-year suspension in all capacities from associating with any FINRA member. FINRA alleged that Purohit had violated FINRA Rule 2010 by altering business-related transportation receipts for purposes of obtaining reimbursement. As set forth in part in the AWC:

Merrill Lynch's expense policy allowed employees to expense late-night car trips home from the office after 10 p.m. Between January 4, 2016 and June 28, 2016, Purohit took a car service from work to his home before 10 p.m. on 50 occasions and charged the rides to his Firm credit card. The charges totaled $3,246.14. To expense the rides to the Firm, Purohit altered the time of the ride on each of the car service receipts so that it would appear as though he took the rides after 10 p.m. He did so by copying each receipt received via email and pasting it into a Word document. He then altered the times of the rides and submitted the altered receipts to the Firm. Merrill Lynch then paid the car service charges on the Firm credit card.  

Indian National Sentenced To More Than Eight Years For Call Center Scam (DOJ Relase)
After pleading guilty to  conspiracy to commit wire fraud and aggravated identity theft in the United States District Court for the Middle District of Florida, Nishitkumar Patel was sentenced to eight years and nine months in federal prison; and ordered to pay a $200,000 money judgment and forfeit cash and a 2015 Land Rover. As set forth in part in the DOJ Release:

[F]rom 2014 through at least 2016, Patel conspired with U.S.-based coconspirators and India-based call centers to extort money from U.S. residents by impersonating IRS officers and misleading victims to believe that they owed money to the IRS and would be arrested and fined if they did not pay their alleged back taxes immediately. The conspirators collected the fraud proceeds by (1) withdrawing cash from prepaid cards purchased and funded by victims; (2) hiring other conspirators (runners) to retrieve money wired by the victims to those runners; and/or (3) hiring runners to open bank accounts into which victims deposited fraud proceeds. The defendants collected the proceeds by providing the runners with the victims' names, locations, and amounts paid. The runners were directed to retrieve the fraud proceeds in cash and turn the funds over to the defendants, often less a payment to the runner for opening the account or conducting the transaction.

Four others previously pleaded guilty for their roles in the scheme. On March 25, 2019, Alejandro Juarez was sentenced to 15 months in federal prison. Hemalkumar Shah, Sharvil Patel, and Brenda Dozier are currently awaiting sentencing.

After pleading guilty to his role in an e-mail compromise scheme in the United States District court for the District of Maryland, Nkeng Amin, a/k/a "Rapone," a/k/a "Arnold," was sentenced to 87 months in prison plus three years of supervised release, and ordered to forfeit and to pay restitution in the amount of $1,021,474. As set forth in part in the DOJ Release:

[B]etween February 2016 and July 2017, Amin and his co-conspirators gained access to e-mail accounts associated with the victims.  Then, posing as an entity with whom the victims were associated, they sent false wiring instructions to the victims, who wired millions of dollars into "drop accounts" set up by Amin and his co-defendants, in the names of fictitious businesses they registered.  Drop accounts were bank accounts opened or controlled by Amin and his co-conspirators that were used to receive fraudulently obtained money from victims.  Amin and others then disbursed the money in the drop accounts that were received from the victims by, among other things: electronically transferring money to other accounts; transferring funds to other accounts at the same bank; withdrawing cash; obtaining cashier's checks; and writing checks to other individuals or entities.

Amin worked hand-in-hand with co-conspirator Aldrin Fomukong to perpetrate the fraud in Maryland.  Amin also independently corresponded with the leaders of the fraud scheme overseas and recruited and managed his own co-conspirators, including co-defendant Yanick Eyong, to open bank accounts to receive victim funds and withdraw the victim funds from the fictitious bank accounts before the fraud was detected.

Former South Carolina Resident Pleads Guilty to Charity Fraud Scheme Targeting Marine Corps Families (DOJ Release)
John Shannon Simpson pled guilty to wire fraud in the United States District Court for the District of South Carolina. In May 2014, Simpson founded "Marines and Mickey," a charity that received about $481,000 in donations earmarked to help targeted United States Marines Corps ("USMC") service members and their families defray their costs of visiting the Walt Disney Resorts, and to fund family visits to USMC boot camp graduations. In fact, only about $90,000 was used for charitable purposes with the balance diverted by Simpson for his personal use. As set forth in part in the DOJ Release:

While acting as the charity's President and in support of fundraising for the charity, Simpson falsely represented himself as a retired career Marine with as much as 20 years of service, a retired Master Sergeant, a former Drill Instructor, and a Recon Marine. 

In fact, Simpson spent less than five years in the Marine Corps. He entered active duty on June 28, 1993. He was absent without leave (AWOL) from June 10, 1996, to June 19, 1997. The highest rank he achieved prior to going AWOL was Lance Corporal/E-3, and his operational specialty was Basic Disbursing Clerk. Simpson was found guilty at a Special Court Martial for violation of Article 86 (Absence without leave) of the Uniform Code of Military Justice, was reduced in rank to Private/E-1, and was given a Bad-Conduct Discharge, which was effective on May 5, 1998.
In a Complaint filed in the United States District Court for the Central District of California,, the SEC charged Motty Mizrahi and his company MBIG Company with with violating the antifraud provisions of Section 10(b) of the Securities and Exchange Act and Rule 10b-5 thereunder and Sections 206(1) and (2) of the Investment Advisors Act. The Court granted emergency relief including a temporary restraining order and an asset freeze. 
Also see, as reported yesterday in the "Securities Industry Commentator": "Brothers Who Allegedly Ran Unlicensed Financial Advisory Business Out of Their Parents' Encino Home Face Wire Fraud Charges" (DOJ Release)
As set forth in part in the SEC Release, the SEC alleged that since June 2012, the Defendants had

defrauded at least 15 advisory clients out of more than $3 million. According to the SEC's complaint, unsealed on March 29, 2019, Mizrahi falsely claimed that MBIG used sophisticated trading strategies to generate "guaranteed" returns of between 2-3% per month, the investments were risk-free, and clients would not lose their money and could withdraw their funds at any time. Unbeknownst to his clients, however, MBIG had no bank or brokerage account of its own - rather, clients unwittingly sent money to Mizrahi's personal bank account. Mizrahi used the money to fund his personal brokerage account, in which he engaged in high-risk options trading producing losses of more than $2.2 million, and to pay personal expenses. The SEC alleges that Mizrahi covered up his fraud by issuing MBIG's clients fabricated account statements, showing positive account balances and profits from trading. When clients demanded proof of MBIG's securities holdings, Mizrahi showed them brokerage statements reflecting a multi-million dollar balance for a fictitious MBIG brokerage account.