Securities Industry Commentator by Bill Singer Esq

Federal Court Affirms Federal Jurisdiction in FINRA Arbitration Appeal (BrokeAndBroker.com Blog)

SEC Charges Private Company with Fraud (SEC Release)

SEC Adopts Amendments to Enhance Retail Investor Protections and Modernize the Rule Governing Quotations for Over-the-Counter Securities (SEC Release)

Montana Broker Sentenced to Prison for Multimillon-Dollar Investment-Fraud Scheme (DOJ Release)

Seven International Cyber Defendants, Including "Apt41" Actors, Charged In Connection With Computer Intrusion Campaigns Against More Than 100 Victims Globally / Two Defendants Arrested in Malaysia; Remaining Five Defendants, One of Whom Allegedly Boasted of Connections to the Chinese Ministry of State Security, are Fugitives in China (DOJ Release)

CFTC Charges Texas Man with Misappropriating Over $8.3 Million In Customer Funds / Defendant Agrees to Liability, Federal Judge Issues Permanent Injunction and Orders Registration, Trading Bans (CFTC Release)

CFTC Charges 4 Florida Men, 1 New Jersey Man, and Their Companies in $4.75 Million Forex Ponzi Scheme / CFTC Secures Federal Court Ruling Freezing Assets (CFTC Release)

Russian Nationals Indicted for Conspiracy to Defraud Multiple Cryptocurrency Exchanges and Their Customers / Defendants Allegedly Perpetrated World-Wide Attacks on Cryptocurrency Platforms and Manipulated the Market to Defraud Customers of at Least $16.8 Million (DOJ Release)

[F]rom at least September 2015 through March 2020, Cygnus and Ventrilla, a Clarence, New York resident who died on September 2, 2020 and was previously convicted of extortion in 1999, made false and misleading statements to investors and misappropriated assets from investment advisory clients. The complaint alleges that Ventrilla told investors that he would invest their funds in publicly traded securities and repay them with trading profits, promising a guaranteed rate of return between 7% and 8%. The complaint alleges that, in reality, Ventrilla had no basis for these statements and used only approximately ten percent of total investor funds to trade securities, spending the majority of investor funds to support his lifestyle or to repay other investors. The complaint also alleges that Ventrilla led at least sixteen investors who had become investment advisory clients to believe that he would manage their assets using separately managed accounts and pay himself a reasonable investment advisory fee. Instead, Ventrilla allegedly misappropriated a significant amount of their funds to support his lifestyle and lied to the clients about their purported portfolio holdings.

[F]inn conspired with others in the United States and Switzerland to promote investments and loan instruments that he knew to be fictitious.  Finn and his co-conspirators told victims that, for an up-front payment ranging from $100,000 to $1 million, a Swiss company known as Malom Group AG (Malom), whose name stood for "Make A Lot Of Money," would provide access to lucrative investment opportunities and substantial cash loans. 

The evidence showed that to effectuate this scheme, the defendant and his co-conspirators provided victims with fabricated bank documents purporting to show that Malom held hundreds of millions of dollars in overseas bank accounts, as well as documents falsely stating that Malom had previously closed similar deals.  The evidence showed that when victims wired their money into an escrow account controlled by the co-conspirators, the money was released and disbursed to, among others, Finn for his own personal use.  The evidence further showed that shortly before he was indicted in 2013, Finn fled to Canada, where he was arrested in 2014 and ultimately extradited back to the United States in 2018.  According to the evidence presented at trial, losses to the victims from the scheme totaled more than $3.8 million.   

In August 2019 and August 2020, a federal grand jury in Washington, D.C., returned two separate indictments charging five computer hackers, all of whom were residents and nationals of the People's Republic of China (PRC), with computer intrusions affecting over 100 victim companies in the United States and abroad, including software development companies, computer hardware manufacturers, telecommunications providers, social media companies, video game companies, non-profit organizations, universities, think tanks, and foreign governments, as well as pro-democracy politicians and activists in Hong Kong.

 The intrusions, which security researchers have tracked using the threat labels "APT41," "Barium," "Winnti," "Wicked Panda," and "Wicked Spider," facilitated the theft of source code, software code signing certificates, customer account data, and valuable business information.  These intrusions also facilitated the defendants' other criminal schemes, including ransomware and "crypto-jacking" schemes, the latter of which refers to the group's unauthorized use of victim computers to "mine" cryptocurrency. 

Also in August 2020, the same federal grand jury returned a third indictment charging two Malaysian businessmen who conspired with two of the Chinese hackers to profit from computer intrusions targeting the video game industry in the United States and abroad.  Shortly thereafter, the U.S. District Court for the District of Columbia issued arrest warrants for the two businessmen.  On Sept. 14, 2020, pursuant to a provisional arrest request from the United States with a view to their extradition, Malaysian authorities arrested them in Sitiawan.  The department appreciates the significant cooperation and assistance provided by the Government of Malaysia, including the Attorney General's Chambers of Malaysia and the Royal Malaysia Police.

In addition to arrest warrants for all of the charged defendants, in September 2020, the U.S. District Court for the District of Columbia issued seizure warrants that resulted in the recent seizure of hundreds of accounts, servers, domain names, and command-and-control (C2") "dead drop" web pages used by the defendants to conduct their computer intrusion offenses.  The FBI executed the warrants in coordination with other actions by several private-sector companies, which included disabling numerous accounts for violations of the companies' terms of service.  In addition, in partnership with the department, Microsoft developed and implemented technical measures to block this threat actor from accessing victims' computer systems.  The actions by Microsoft were a significant part of the overall effort to deny the defendants continued access to hacking infrastructure, tools, accounts, and command and control domain names.  In coordination with today's announcement, the FBI has also released a Liaison Alert System (FLASH) report that contains critical, relevant technical information collected by the FBI for use by specific private-sector partners.

The order finds that from March 2016 to April 2019, Seibert operated under a number of fictitious names in connection with his misappropriation scheme: SEI-Equity Investments, a/k/a SEI Equity Investments, a/k/a Seibert Equity Investments, and d/b/a Great America Funding LLC a/k/a Great American Funding, LLC, a/k/a Great American Funding Lender Services. According to the order, Seibert solicited more than $10 million from at least eight members of the public to provide funds for short-term secured loans in return for the promise of high interest from third-party borrowers who purportedly would use their funds for real property improvements.

The order finds that Seibert did not originate any loans. Instead, he pooled and traded the funds in his commodity interest trading account without disclosing he was doing so. He thereafter lost $8,336,148 through these trades, and used other participants' funds for various personal expenses, which he similarly did not disclose. 

The complaint alleges that beginning in or around February 2013 and continuing to the present, the defendants accepted at least $4.75 million from over 150 victims. In soliciting potential victims to participate in Highrise, Avinash Singh falsely claimed to be a successful commodities trader with a track record of positive gains and no losses. Cologero, Hemraj Singh, and Rosseau also allegedly misrepresented the profits Highrise had generated-as well as the potential risk of loss in Highrise-when soliciting funds for their scheme.

The complaint alleges that of the at least $4.75 million accepted, Avinash Singh and Highrise traded only a combined amount of $1,656,000 in forex and misappropriated at least $3 million of victims' funds to pay personal expenses, to transfer to other defendants, and to make Ponzi-type payments to other victims.

Highrise, Green Knight, Bull Run, and King Royalty each issued monthly account statements to their victims that misrepresented their profits and balances. The complaint further alleges that SR&B received at least $1,350,000 in funds from victims in its own name and then transferred this money to Highrise to fund a forex account.

The complaint further charges all defendants with failing to register with the CFTC as required and with violating other regulatory requirements relating to the operation of commodity pools.

• Securities Industry Commentator
• Bill Singer