Securities Industry Commentator by Bill Singer Esq

[B]eginning by at least 2008 and continuing through 2014, precious metals traders employed by MLCI schemed to deceive other market participants by injecting materially false and misleading information into the precious metals futures market.  They did so by placing fraudulent orders for precious metals futures contracts that, at the time the traders placed the orders, they intended to cancel before execution.  In doing so, the traders intended to "spoof" or manipulate the market by creating the false impression of increased supply or demand and, in turn, to fraudulently induce other market participants to buy and to sell futures contracts at quantities, prices and times that they otherwise likely would not have done so.  Over the relevant period, the traders placed thousands of fraudulent orders.

MLCI entered into a non-prosecution agreement (NPA) and agreed to pay a combined $25 million in criminal fines, restitution and forfeiture of trading profits.  Under the terms of the NPA, MLCI and its parent company, Bank of America Corporation (BAC), have agreed to cooperate with the government's ongoing investigation of individuals and to report to the Department evidence or allegations of violations of the wire fraud statute, securities and commodities fraud statute, and anti-spoofing provision of the Commodity Exchange Act in BAC's Global Markets' Commodities Business, whose function is to conduct wholesale, principal trading and sales of commodities.  MLCI and BAC also agreed to enhance their existing compliance program and internal controls, where necessary and appropriate, to ensure they are designed to detect and deter, among other things, manipulative conduct in BAC's Global Markets Commodities Business.

The Department reached this resolution based on a number of factors, including MLCI's ongoing cooperation with the United States and MLCI and BAC's remedial efforts, including conducting training concerning appropriate market conduct and implementing improved transaction monitoring and communication surveillance systems and processes.

The Commodity Futures Trading Commission (CFTC) announced a separate settlement with MLCI today in connection with related, parallel proceedings.  Under the terms of the resolution with the CFTC, MLCI agreed to pay a civil monetary penalty of $11.5 million, along with other remedial and cooperation obligations in connection with any CFTC investigation pertaining to the underlying conduct.

In 2008, Belsky was permanently barred by the CFTC from trading in commodity futures transactions and options.  Nevertheless, from March 2014 to October 2018, Belsky presented himself to potential investors - using an alias - as an experienced securities and commodities trader.  Belsky promised his victims that he would invest their money by trading securities or binary options, a type of investment in which investors are promised an opportunity to be paid predetermined amounts based upon the price of securities, commodities or other investments at particular points in time.  Instead of doing as promised, Belsky misappropriated his victims' investments for his personal use and to reimburse investors who had demanded repayment.

[W]orldwide Markets, Ltd., registered in the British Virgin Islands, and its CEO, Thomas Plaut, solicited foreign investors with offers to "own and trade" U.S. stocks. The SEC further alleges that customers were offered "quick and easy" account opening and promised that any withdrawal requests would be processed within two business days. However, instead of providing its customers with stocks, Worldwide Markets-at Plaut's direction-sold its unwitting customers single-security contracts for difference (CFDs). CFDs are a derivative product that provide exposure to an underlying asset without ownership, and materially differ from traditional stock ownership.

The SEC alleges that Worldwide Markets furthered its fraudulent scheme by improperly misappropriating at least $400,000 of customer deposits. Worldwide Market used the customer deposits for undisclosed purposes such as financing other business lines and reimbursing employee expenses. Despite its representations that customer withdrawals would be processed within two business days, Worldwide Markets allegedly has not honored a single customer withdrawal request since 2017. In addition, the SEC alleges that Worldwide Markets failed to register its security-based swap offerings and sales, transact its security-based swaps on a registered national exchange, and register as a broker as required by the federal securities laws.

[O]n or about September 20, 2018, defendant Juan Carlos Diaz-Rodriguez, an employee of a financial institution, Banco Popular de Puerto Rico, notified Individual A and others, about the existence of, and contents of, a Federal grand jury subpoena for customer records of that financial institution. The subpoena served on Banco Popular de Puerto Rico related to possible crimes involving violations of 18 U.S.C. §§ 1956, 1957 (money laundering). Defendant Diaz-Rodriguez acted with intent to obstruct a judicial proceeding.

On or about June 5, 2019, Diaz-Rodriguez did willfully and knowingly make a materially false, fictitious, and fraudulent statement and representation in a matter within the jurisdiction of the executive branch of the Government of the United States. During a voluntary interview, Diaz-Rodriguez told Special Agents of the FBI that he did not take a photograph of a Federal grand jury subpoena regarding bank records belonging to Individual B and that he, the defendant, did not send a photograph of said Grand Jury Subpoena to anyone.

The statement and representation were false because Diaz-Rodriguez then and there knew that he did take a photograph of the Grand Jury Subpoena, and that he did send a message to Individual A containing a photograph of the Grand Jury Subpoena.

Guo and his co-conspirators made false representations about the Hong Kong-based company - known as CKB 168, but also sometimes known as CKBMax and Cyber Kids Best Education Limited. The false representations included claims that it generated substantial revenues from the sale of web-based children's educational courses, that investments could be quickly liquidated for significant returns, that investors would get pre-initial public offering shares of CKB, and that the company would go public through an IPO. In reality, the only way for investors to earn any meaningful returns was for them to actively recruit new investors.

Guo and his co-conspirators promoted CKB through YouTube videos and other postings on the internet, as well as through meetings with prospective investors and live presentations about the purported investment opportunity.

Between mid-2011 and January 2014, Guo and his co-conspirators solicited investments in increments of $1,380, which gave investors "Profit Reward Points" they claimed were worth $750 in cash, would only increase in value, and could be converted to pre-IPO shares of CKB. Guo and his co-conspirators collected money from new investors and simply pocketed the cash to pay themselves the "commission" they earned from CKB, and lulled investors by providing them with essentially worthless Profit Reward Points.          

[ N]guyen falsely presented himself as an experienced former Goldman Sachs banker, and failed to disclose that he was a twice convicted felon, including for a prior investment scam.

As alleged in the complaint, Nguyen offered investors the chance to invest in a "fund" he called "Nguyen Tran Le Fund"; undisclosed to investors, however, the so-called fund is really a collection of financial accounts held by Nguyen, NTV, and Nguyen's girlfriend. Nguyen also, according to the complaint, falsely promised investors 16% annual returns, that their investments were 100% guaranteed, that he had never lost money managing client accounts, and that they could withdraw their money at any time-all while he was losing significant investor money. Nguyen allegedly also improperly used about $600,000 in investor funds for business and personal expenses, including purchases of a home and vehicles.

• Securities Industry Commentator
• Bill Singer