The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
March 4, 2020
Trading app Robinhood experiencing 'major outage' for a second day amid heavy volume market action (CNBC by Kate Rooney)Austin Man Pleads Guilty To Computer Hacking And Fraud Scheme To Steal Unreleased Music From Music Industry Professionals (DOJ Release)
Department of Justice Charges Unprecedented Number of Elder Fraud Defendants Nationwide and Launches Hotline (DOJ Release)
https://www.justice.gov/opa/pr/department-justice-charges-unprecedented-number-elder-fraud-defendants-nationwide-and
Ass noted in the DOJ Press Release, the FBI and DOJ
announced the largest coordinated sweep of elder fraud cases in history. This year, prosecutors charged more than 400 defendants, far surpassing the 260 defendants charged in cases as part of last year's sweep. In each case, offenders allegedly engaged in financial schemes that targeted or largely affected seniors. In total, the charged elder fraud schemes caused alleged losses of over a billion dollars.
As further set forth in the DOJ Press Release:
ELDER FRAUD HOTLINEAttorney General Barr also announced the launch of a National Elder Fraud Hotline, which will provide services to seniors who may be victims of financial fraud. The Hotline will be staffed by experienced case managers who can provide personalized support to callers. Case managers will assist callers with reporting the suspected fraud to relevant agencies and by providing resources and referrals to other appropriate services as needed. When applicable, case managers will complete a complaint form with the Federal Bureau of Investigation Internet Crime Complaint Center (IC3) for Internet-facilitated crimes and submit a consumer complaint to the Federal Trade Commission on behalf of the caller. The Hotline's toll free number is 833-FRAUD-11 (833-372-8311).TRANSNATIONAL ELDER FRAUD STRIKE FORCEThe Transnational Elder Fraud Strike Force prosecuted more than one quarter of the defendants charged as part of the announced sweep. Established in June 2019, the Strike Force is composed of the department's Consumer Protection Branch and six U.S. Attorneys' Offices (Central District of California, Middle and Southern Districts of Florida, Northern District of Georgia, Eastern District of New York, Southern District of Texas), along with FBI special agents, Postal Inspectors, and numerous other law enforcement personnel. Prosecutors in Strike Force districts brought cases against more than 140 sweep defendants. FBI and the Postal Inspection Service served as lead agencies in the Strike Force and committed substantial investigative resources to pursuing elder fraud cases as part of Strike Force efforts. The Strike Force has held dozens of meetings with industry, victim groups, and law enforcement at the federal, state, and local levels to identify the most harmful schemes victimizing American seniors and to bolster preventive measures against further losses.
http://www.brokeandbroker.com/5098/tax-liens-finra/
Sometimes a registered representative's non-disclosure of a tax lien is inadvertent: You didn't know that one had been filed. Sometimes the rep believed that a tax dispute had been resolved and no lien was issued -- or his CPA gave the impression that the lien had been recalled, cancelled, or something along the lines that what was, isn't, and, as such, fuggedaboutit. Whatever the explanation or excuse, during some four decades practicing law on Wall Street, I've likely hear 'em all. In a small percentage of "I didn't know about the lien" cases, the rep is truly the unfortunate victim of a bona fide misunderstanding; however, more often than not, the rep intentionally embarked upon a course of non-disclosure out of embarrassment or out of fear that a disclosure would prompt a termination. Consequently, yet again, here is my annual offering about the dire consequences of willfully failing to disclose tax liens.
Rep Fined And Suspended by FINRA for Undisclosed Customer Settlement. In the Matter of Billy Hai Zhang, Respondent (FINRA AWC 2018057646701)
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, Billy Hai Zhang submitted a Letter of Acceptance, Waiver and Consent ("AWC") finding that he had violated FINRA Rule 2010, which FINRA accepted.The AWC asserts that Billy Hai Zhang was first registered in 2008 with FINRA member firm AXA ADvisors, LLC, where he remained until 2018. The AWC asserts that Zhang "has no relevant 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 imposed upon Billy Hai Zhang a $5,000 fine and a 15-business-day suspension from association with any FINRA member firm in any capacity. As set forth in part in the AWC:
In November 2016, Zhang received a written communication from one of his customers of the Firm, in which the customer complained about the use of proceeds from the partial redemption of a variable life insurance product. The proceeds, in the amount of $10,600, were used to reinstate a separate policy that had lapsed due to the non-payment of premiums. Three months later, on February 23, 2017, Zhang paid $10,600 to settle the customer's complaint. Zhang failed to notify the Firm about the complaint or obtain its consent or approval before making the payment.
Trading app Robinhood experiencing 'major outage' for a second day amid heavy volume market action (CNBC by Kate Rooney)
https://www.cnbc.com/2020/03/03/trading-app-robinhood-experiencing-major-outage-for-a-second-day-amid-heavy-volume-market-action.html
As reported in part by Kate Rooney:
As U.S. stocks traded actively again Tuesday in wake of a surprise Fed rate cut, Robinhood reported a "major outage" for trading across its platform. Earlier updates on the site said that all trading was "operational," but Twitter users posted screenshots of error messages as U.S. markets opened Tuesday.
"We are experiencing a system-wide outage," a message read on Robinhood's website.
Technical issues Monday lasted through the trading day, leaving users with their hands tied as the Dow Jones Industrial Average's biggest one-day point gain in history. On Tuesday, stocks surged off their lows after the Federal Reserve cut interest rates in an effort to stem slower economic growth from the coronavirus outbreak
Bill Singer's Comment: Maybe the SEC needs to re-visit "operational capacity"? At some point, either brokerage firms scale their operations to handle market gyrations or they will be held accountable via customer lawsuits. Imagine wanting (needing) to close out a position that's running against you but being unable to access your trading screen -- and, worse, being directed to a telephone system where staffing can't keep up with the flood of calls!
Austin Man Pleads Guilty To Computer Hacking And Fraud Scheme To Steal Unreleased Music From Music Industry Professionals (DOJ Release)
https://www.justice.gov/usao-sdny/pr/austin-man-pleads-guilty-computer-hacking-and-fraud-scheme-steal-unreleased-music-music
Christian Erazo, 27, pled guilty in the United States District court for the Southern District of New York to one count each of conspiracy to commit wire fraud and of conspiracy to commit computer intrusion. As alleged in part in the DOJ Release:
From at least in or about late 2016 through at least in or about April 2017, CHRISTIAN ERAZO, the defendant, and others known and unknown, unlawfully obtained unauthorized access to Internet cloud storage service accounts of two music management companies and a music producer ("Producer Victim-1") by, among other things, using the credentials, or usernames and passwords, of individuals with authorized access to those accounts. From those accounts, ERAZO and his co-conspirators stole over approximately 50 gigabytes of music, including music that had not yet been publicly released, from over 20 recording artists, as well as usernames and passwords to other online accounts, among other things. ERAZO and his co-conspirators also leaked on public online forums music that had not yet been publicly released, causing financial and reputational harm to Producer Victim-1 and other recording artists.In addition, from at least in or about late 2016 through at least in or about late 2017, CHRISTIAN ERAZO, and others known and unknown, unlawfully accessed without authorization a social networking account belonging to Producer Victim-1, from which ERAZO and a co-conspirator ("CC-1") impersonated Producer Victim-1 and sent private messages to numerous recording artists to solicit music from them that they had not yet released. ERAZO and CC-1 directed these artists to send their music to a fake email account that ERAZO created that incorporated Producer Victim-1's professional name, which numerous artists did.
SEC Files Subpoena Enforcement Action Against Individual Who Failed to Appear for Testimony (SEC Release)
https://www.sec.gov/litigation/litreleases/2020/lr24757.htm
In July 2019, the SEC issued a subpoena to Michael Staisil requiring him to appear for investigative testimony. After Staisil failed to appear SEC issued a second testimony subpoena in November 2019, which he also ignored. Thereafter, the SEC filed a subpoena enforcement action in the United States District Court for the Southern District of New York against Michael Staisil seeking an order directing him to comply with an investigative subpoena for testimony. As alleged in part in the SEC Release:
[T]he SEC's investigation concerns an alleged Ponzi-like scheme that raised over $345 million from over 230 investors across the United States. On September 13, 2018, the SEC filed an emergency action in federal district court in Baltimore, Maryland against Kevin Merrill, Jay Ledford, Cameron Jezierski, and certain entities owned or controlled by Merrill or Ledford to halt the scheme. In its ongoing investigation, the SEC has reason to believe that Staisil may have worked on behalf of Merrill in raising millions of dollars from numerous individual and institutional investors. The SEC is investigating whether Staisil engaged in deceptive or other unlawful conduct in raising money from those investors.