Securities Industry Commentator by Bill Singer Esq

April 24, 2019
In an Indictment filed in the United States District Court for the Central District of California, Michael Godfree was charged with five counts of mail fraud, one count of money laundering and one count of aggravated identity theft for misusing the name of an attorney. As set forth in part in the DOJ Release:

[G]odfree was co-founder of The Minerals Acquisition Company (TMAC), a Pasadena-based outfit that offered to sell slag to victims who were told the company possessed "proof of concept" of a method to extract precious metals from this slag, which was generated from copper mining. TMAC sold ton-quantities of the slag with promises of refining the material and recovering precious metals. TMAC provided victims with supposedly attorney-certified "Certificates of Title" that purported to transfer ownership of the slag to victims. 

Godfree's scheme was nothing more than a series of lies, according to the indictment, which alleges that Godfree and TMAC did not actually own the vast majority of the slag they sold, there was not a commercially viable process for extracting precious metals from the slag, and the business operation had not been endorsed by an attorney.

TMAC was dissolved in 2015, but its operations were largely taken over by Precious Metals of North America, Inc., another of Godfree's companies.

As a result of the fraudulent conduct, prosecutors believe that Godfree generated at least $7 million in sales from more than 100 victims.

Rather than using the victims' money for the purchase of slag and to develop an extraction process, prosecutors said Godfree and his co-schemers used victims' money to pay for, among other things, sales commissions and Godfree's personal expenses, which included the purchase of luxury items.
As best I remember, a "syllogism" consists of a major premise and a minor premise. Somehow you apply deductive reasoning to the premises and it leads you to a conclusion. All these years later, I still remember the example of All men are mortal. Socrates is a man. Socrates is mortal. I also remember the line about Socrates was a guy who went around giving everyone free advice, so the killed him. Not sure that the latter is an example of a syllogism but I may have cut that class. In today's blog, we have a Wall Street regulatory syllogism in search of a premise. We know that a 2015 FINRA AWC involving Voya Financial was deemed a "relevant disciplinary history" in a 2016 FINRA AWC involving Voya. We know that the same 2015 FINRA AWC was deemed a "relevant disciplinary history" in a 2019 FINRA AWC involving Voya. What we struggle with via deduction is why the 2016 FINRA AWC wasn't disclosed as a "relevant disciplinary history" in the 2019 FINRA AWC involving Voya. 

SEC Halts Misappropriation and Fraudulent Securities Offering (SEC Release)
In a Complaint filed in the United States District Court for the District of Massachusetts., the SEC charged Eric D. Lyons, Synchrony Capital GP, LLC, Synchrony Capital Group, and Synchrony Group, LLC with violating the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act and Rule 206(4)-8 thereunder. The Complaint sought injunctive relief, disgorgement of ill-gotten monetary gains, plus interest and penalties; and additionally names Synchrony Global Macro, LP, which holds investor assets, as a relief Defendant. The Court granted a temporary restraining order, asset freeze, and other emergency and ancillary relief. As set forth in part in the SEC Release:

[F]rom mid-2017 to the present, Lyons and various investment adviser entities with the name Synchrony that Lyons controlled engaged in a scheme to misappropriate assets from hedge funds Lyons and these Synchrony adviser entities managed. The SEC alleges that Lyons transferred hundreds of thousands of dollars from the Synchrony hedge funds to Lyons' personal bank accounts to pay for personal expenses, including frequent vacation travel, entertainment, rent, automobile lease payments, and other personal expenses. Further, the SEC alleges that Lyons replaced some of the misappropriated money by engaging in a securities offering fraud, in which he obtained approximately $300,000 from an investor based on false and misleading statements about other potential large investors and a fabricated $100 million business valuation. In total, the SEC's complaint alleges that Lyons and the Synchrony adviser entities raised approximately $700,000 from their misappropriation and securities offering fraud schemes.