Securities Industry Commentator by Bill Singer Esq

February 5, 2020

FINRA Imposes Fine and Suspension for Rep's Excessive and Unsuitable Microcap Trading In Account of Customer  With Cancer. In the Matter of Peter D. Monson, Respondent (FINRA AWC 2017053162102)

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, Peter D. Monson submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that Peter D. Monson was first registered in 1992, and since 2014, he was registered with FINRA member firm Van Clemens & co., Inc.. The AWC alleges that Monson "does not have any disciplinary history with the Securities and Exchange Commission, any state securities regulators, FINRA, or any other self-regulatory organization." In accordance with the terms of the AWC, FINRA found that Monson had violated FINRA Rules 2510, 2111, and 2010; and the self regulator imposed upon him a $7,500 fine and a six-month suspension from association with any FINRA member firm in any capacity. The AWC notes that there is no provision for restitution because the beneficiary of GC's account had entered into a settlement with both Monson and Van Clemens.
Bill Singer's Comment: Compliments to FINRA for a very well written AWC replete with content and context. An excellent presentation of the various metrics that come into play when analyzing questionable trading. 
As alleged in the "Overview" portion of the AWC:

Between June 1, 2015, and June 30, 2016, Monson engaged in excessive and unsuitable trading in the Individual Retirement Account ("IRA") of his customer, GC. Monson actively traded risky, microcap stocks in GC's account throughout that period, even though GC's account value had declined by more than 60% since its inception and GC was facing a serious illness. Through this conduct, Monson violated FINRA Rules 2111 and 2010.

When placing these trades in GC's account, Monson regularly exercised discretion without the required authorization from either GC or Van Clemens & Co., the broker-dealer for which he worked. During the same period, Monson also exercised discretion without written authorization when placing trades in the accounts of at least two other customers. Through this conduct, Monson violated NASD Conduct Rule 2510(b) and FINRA Rule 2010.
Chukwuemeka Eze pled guilty in the United States District Court for the District of Massachusetts to bank fraud, money laundering, and aggravated identity theft; and he was sentenced to 51 months in prison plus five years of supervised release, and ordered to pay $862,823 in restitution. As alleged in part in the DOJ Release:

Eze admitted that he used a victim's name, date of birth and Social Security number without permission to open bank accounts in the victim's name and in the name of a fictitious Massachusetts corporation that Eze created, Levistronix GMB Ltd. Eze selected the name for Levistronix because of its similarity to Levitronix GmbH, an actual Swiss company. In May and June 2018, others involved in the scheme sent fake Levitronix invoices totaling approximately $1.4 million to a Korean company that was a Levitronix customer. The fake invoices directed the company to send the $1.4 million to Eze's deceptively-named Massachusetts bank account.

When Eze received the money, he withdrew cash, and spent tens of thousands of dollars on retail purchases, including Apple laptops and Zales' jewelry. He also purchased $700,000 in bank checks payable to other fictitious companies that he controlled, which he deposited into bank accounts in those companies' names. Eze in turn made cash withdrawals, retail purchases and wire transfers from those bank accounts, all to conceal the fact that the money was the proceeds of the fraud scheme. In doing so, Eze spent or disbursed more than $862,000 of the Korean company's money. 

Providence Man Pleads Guilty in Bogus Check, Bank Fraud Scheme (DOJ Release)
Edmilson Rodrigues pled guilty in the United States District Court for the District of Rhode Island to conspiracy to commit bank fraud and three counts of bank fraud. As alleged in part in the DOJ Release, Rodrigues admitted to his role in a:

scheme to duplicate "real checks" provided to members of the conspiracy by insiders at local law firms, social services agencies, and local colleges.

According to information presented to the court, the bogus checks were deposited by Rodriques and others into actual bank accounts at bank branch offices in Rhode Island and Massachusetts. As part of the scheme, Rodriques and others quickly withdrew the funds, at times using stolen bank account and personal identifying information, before the bank determined that the deposited checks were bogus.

According to court documents, an investigation by Providence Police Detectives, the United States Secret Service, and the FBI determined that on at least eighteen occasions between May 2013 and February 2019, members of the conspiracy deposited bogus checks and withdrew funds, defrauding banks of well over $100,000. Rodrigues acknowledged that he joined the conspiracy in June 2017, depositing bogus checks and then either withdrawing the funds or having others do so at his direction.

SEC Wins Jury Trial Against Massachusetts Man Charged in Multi-Year Insider Trading Scheme (SEC Release)
After a jury trial in the United States District Court for the District of Massachusetts, restaurateur Charlie Chen was found liable of violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 thereunder, and Section 17(a) of the Securities Act. In part the DOJ Release alleged that:

Chen, who was close friends with a Vistaprint insider and her husband, received highly confidential nonpublic information and used it to place trades in advance of five different announcements of Vistaprint's financial results from April 2013 through July 2014. On some occasions, Chen placed extremely aggressive bets such as wagering much of his retirement account on risky Vistaprint options before the company's announcement of disappointing earnings results in April 2014. According to evidence presented at the trial, Chen made over $800,000 in illicit trading profits. The evidence at trial also showed that, upon being questioned by the FBI in 2016, Chen claimed that he did not know anyone who worked at Vistaprint and falsely denied having a close relationship with the Vistaprint insider and her husband with whom he and his family had vacationed.