Securities Industry Commentator by Bill Singer Esq

Smith, Bell and Peters conspired together between April 2917 and April 2018 to pass counterfeit $100 bills to purchase items that they sometimes returned to cash. They traveled together to stores Pennsylvania, Michigan and Ohio.

For example, on April 6, 2017, Bell passed four counterfeit $100 bills to an employee at Dick's Sporting Goods in Butler, Pennsylvania to purchase items. Two days late, Bell traveled to the Dicks's Sporting Goods store in Mentor, Ohio, and returned the items he purchased for cash, according to court documents.

On April 27, 2017, Peters passed seven counterfeit $100 bills to employees at the Kohl's in State College, Pennsylvania to purchase two Citizen watches. The next day, at the Kohl's in Macedonia, Ohio, Peters returned one of the watches for approximately $409.96, according to the indictment.

Bill Singer's Comment: I'm sorta wonderin' -- you know, just thinkin' out loud here -- but if they had made their purchases on Amazon, would they have been given a 10% sentencing reduction as Prime members?

Jury Returns Conviction in On-Line Dating Fraud Conspiracy (DOJ Release)
https://www.justice.gov/usao-wdok/pr/jury-returns-conviction-line-dating-fraud-conspiracy

Nnamdi Franklin Ojimba was convicted in the United States District Court for the Western District of Oklahoma of conspiring to commit wire fraud. As set forth in part in the DOJ Release:

[O]jimba and others defrauded individuals by fostering what appeared to be a genuine romantic relationship on-line and then convincing those individuals to send them money.  Ojimba and others used the persona "Edward Peter Duffey" and claimed to be a successful financial advisor or affiliated with charitable causes.  He purported to have inside financial information, such as knowledge that the investment firm used by the victim was under investigation or was financially unsound.  As a result of these fraudulent claims, victims wired money to conspirators for what they believed would be investments.  In reality, Ojimba and his conspirators kept the money for themselves.

Two of Ojimba's conspirators, Ken Ejimofor Ezeah and Akunna Baiyina Ejiofor, have already been convicted and sentenced.  Ezeah, who pleaded guilty to conspiracy, was sentenced to 11 years in prison on October 6, 2017, and ordered to pay $4,678,302.79 in restitution to ten victims.  Ejiofor was convicted by a jury on March 30, 2017, and sentenced to seven years in prison on September 28, 2017.

In October 2018, a jury was unable to reach a verdict on the conspiracy count.  The United States re-tried the conspiracy case against Ojimba beginning on August 12, 2019, before a different jury.  On August 16, he was found guilty.  Chief United States District Judge Timothy D. DeGiusti ordered that Ojimba be detained in the custody of the U.S. Marshals Service pending further proceedings.

Delaware Businessman Sentenced to Federal Prison In Multi-Million Dollar Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-de/pr/delaware-businessman-sentenced-federal-prison-multi-million-dollar-ponzi-scheme
Carl Chen, owner of Chenmax Properties, Inc., a Delaware Real Estate Investment Trust, and part-owner of Re/Max Sunvest Realty Co., pled guilty to wire fraud in the United States District Court for the District of Delaware and was sentenced to 51 months in prison. As set forth in part in the DOJ Release:

[C[hen operated Chenmax Properties since 1997, soliciting large real estate investments from his real-estate clients and others. Chen promised his investors guaranteed interest and a full return of their principal payments.  However, by 2013, Chen's business was losing money, and Chen began diverting newly invested funds to pay prior investors. 

The government calculated that Chen fraudulently collected at least $3.32 million in investments from twenty different victims between 2013 and 2017.  In October 2017, Chen declared bankruptcy in the United States Bankruptcy Court for the District of Delaware, seeking to discharge $6.738 million of debt he owed to investors, including the victims of his fraud.

United States District Judge Richard G. Andrews, who sentenced Chen, noted that the case was "One of the most horrendous white collar offenses that I remember seeing."

Victims at the sentencing hearing described how Chen solicited hundreds of thousands of dollars in investments from them on multiple occasions, claiming that the investments were for real estate ventures.  In actuality, the money investors paid Chen was immediately used to pay off other investors or for Chen's personal expenses.

SEC Charges Head Sales Agent in South Florida Alternative Investments Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/2019/lr24570.htm
In a Complaint filed in the United States District Court for the Southern District of Florida  https://www.sec.gov/litigation/complaints/2019/comp24570.pdf, the SEC alleged that Scott P. Strochak violated the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act  and Rule 10b-5 thereunder, as well as the broker-dealer registration provisions of Section 15(a) of the Exchange Act. Strochak agreed to a judgment that permanently enjoins him from violating the charged provisions of the federal securities laws, and orders him to pay $250,056 in disgorgement and prejudgment, to be offset by any restitution order entered against him in the parallel criminal case, in which he pled guilty and is awaiting sentencing.  As set forth in part in the SEC Release:

[S]trochak participated in a fraudulent scheme that raised nearly $3.8 million from at least seventeen retail investors until the SEC halted the scheme in February when it filed an emergency action against Castleberry Financial Services Group, LLC, its president T. Jonathon Turner and its CEO Norman M. Strell. According to the SEC's complaint, Strochak, who had decades of experience in the financial services industry, solicited investors using false representations that Castleberry investments were bonded and insured by leading insurance companies, even after he received several complaints from investors who were not provided proof of such insurance. Strochak also allegedly misrepresented Castleberry's profitability, despite knowing that Castleberry denied some investors' requests to withdraw their principal due to insufficient funds. The complaint further alleges that Strochak was reckless in repeating Castleberry's false claims that it had grown by $600 million in capital and 300 investors in 2018, when he knew that, as the sole sales agent until December 2018, he had brought in only about $2 million from about seven investors that year.

[R]abalais and his alter ego entities, Crystal World and The New Sports Economy Institute, solicited over $1.5 million from retail investors from 2014 through 2019 by misleadingly describing the Crystal World stock as "gifts" offered in exchange for "donations" to The New Sports Economy Institute, a nonprofit entity that Rabalais founded and controlled. According to the Complaint, throughout the fundraising period, Rabalais and his entities further misled investors and prospective investors by repeatedly promising that the Crystal World stock would soon be registered with the SEC, stressing the importance of buying the stock before registration made it valuable. In fact, Rabalais and his entities never took any steps to register the stock and, for much of the fundraising period, did not understand how to achieve such registration.

In December 2018, five customers signed documents to transfer their simple IRA accounts, held at a mutual fund company, to a new 401(k) plan provided by Morgan Stanley. Tillotson received permission from these five customers to directly contact the mutual fund company in the event additional information was necessary to complete the transfers. Thereafter, Tillotson impersonated the five customers during five telephone calls to the mutual fund company to obtain the information necessary to complete the transfers. Although the customers gave Tillotson permission to obtain this information, they did not give Tillotson permission to impersonate them with the mutual fund company.  

In 2014, Rookasin recommended that his client, LS, exchange a $1.3 million fixed annuity for a combination of three variable annuities, but UBS later rejected the proposed transaction pursuant to an internal policy. Thereafter, in the fall of 2014, Rookasin aided JD, a registered representative of another member firm with whom Rookasin had no prior relationship, in JD's execution of this exchange for LS after LS opened an account at JD's member firm with JD as her registered representative. 

JD recommended and LS exchanged her fixed annuity to purchase two different variable annuities in the account she had opened at JD's firm. Rookasin, remained involved with the transactions, including by being the point of contact between LS and JD. In late 2014 and early 2015, Rookasin accepted compensation from JD in the amount of $50,318.86, which represented approximately half of the total commissions JD earned in connection with the transactions. Rookasin did not notify UBS of this arrangement. 

• Securities Industry Commentator
• Bill Singer