Securities Industry Commentator by Bill Singer Esq

December 1, 2020

Pennsylvania Attorney Sentenced for Role in $2.7 Million Ponzi Scheme (DOJ Release)

Lead Defendant Pleads Guilty in Long Island Federal Court to Transnational Fraud Scheme / Callers Based in India Impersonated Federal Employees and Netted Over $2 Million From Victims Across the United States (DOJ Release)
If a customer complaint is not filed by a customer, is it a customer complaint? If a brokerage firm discloses in regulatory filings that a stockbroker was the subject of a customer complaint but the firm itself disputes that the complainant was a customer, does that give the firm a free pass to file the complaint anyway? And as we all contemplate Wall Street's regulatory and compliance navel and seek peace with the universe, we should remember that the issues under scrutiny are of serious concern for the stockbroker, whose otherwise unblemished reputation has been tarnished. Yes, he's a victim. No, there is no simple, direct process by which he can clear his name and obtain recompense for his ordeal.

JPMorgan Traders Set for Up to 20% Bonus Jump After Record Year (Bloomberg by Michelle F Davis and Sridhar Natarajan)
An excellent report from Bloomberg on Wall Street's response to the COVID pandemic and how different banks are calculating this year's bonuses. As is too often the case with a frequently tone-deaf industry, Bloomberg's Davis and Natarajan note in part that:

A 20% bump for traders will come as a disappointment for those hoping payouts would rise in line with the 48% surge in revenue generated by JPMorgan's markets businesses so far in what was some workers' busiest and most stressful year ever.

Executives are preparing smaller payouts for the rest of the firm, with average bonuses likely to be lower than last year as JPMorgan focuses on reining in costs ahead of an uncertain 2021, the people said. The bank also is planning to freeze raises for most employees at the vice president level and above, the people said, echoing plans by Wells Fargo & Co. to freeze raises for top earners.
Attorney Todd H. Lahr, 60, pled guilty in the United States District Court for the Eastern District of Pennsylvania to one count of conspiracy to commit securities fraud and wire fraud, two counts of securities fraud, and four counts of wire fraud; and he was sentenced to 6 1/2 years in prison plus three years of supervised release, and ordered to pay $2,106,918 in restitution. As alleged in part in the DOJ Release;

[F]rom 2012 through 2019, Lahr conspired with others to perpetrate a securities fraud scheme targeting his own law clients, which involved the fraudulent sale of the securities of two entities, THL Holdings LLC and Ferran Global Holdings Inc.

Lahr initially sold THL Holdings investments, promising that the money raised would be used to pursue specific business opportunities, including mining operations in Papua New Guinea and the acquisition of the shares of a penny stock.  In reality, the money was used for Lahr's personal expenses and to make Ponzi scheme payments to prior investors, among other things. Once Lahr realized that he was running out of investor money to pay the THL Holdings investors, he sought investors for a second entity, Ferran.  He told the Ferran investors that their money would be used for business opportunities, including even more mining in Papua New Guinea and residential property leases in Spain and England-but, in fact, these funds were used to repay the prior THL Holdings investors and, again, for Lahr's personal expenses to fund his lifestyle.  Among these personal expenses were his home mortgage, his child's school tuition, utility bills, and other personal debt. Total investor losses are estimated to be over $2.7 million.

Even after he was caught, Lahr continued his deception by lying in sworn testimony before the U.S. Securities and Exchange Commission (SEC). In this testimony, Lahr denied writing checks to his personal accounts from the THL Holdings accounts, when, in fact, he had written at least 25 separate checks to himself over a three-year period.

As previously reported in the Securities Industry Commentator on June 25, 2020, the SEC alleged that Todd H. Lahr, Esq. had orchestrated a $1.4 million Ponzi scheme that victimized at least 10 retail investors (among which were clients of his law firm). As alleged in part in the SEC Release:

Lahr, together with co-defendant Thomas Megas of Switzerland, targeted Lahr's clients to raise funds for several Megas-led business ventures, including mining operations in Papua New Guinea and real estate investments in Barcelona and London. Instead, Lahr and Megas allegedly used investor funds to pay earlier investors and for various personal expenses, including Lahr's mortgage payments and credit card bills and Megas' restaurant bills and ATM withdrawals.

In a parallel criminal action by the U.S. Attorney's Office for the Eastern District of Pennsylvania and the Fraud Section of the Department of Justice, Lahr pleaded guilty and is awaiting sentencing.

The final judgment against Lahr permanently enjoins him from violating the registration provisions of Sections 5(a) and (c) of the Securities Act of 1933, and the antifraud provisions of Sections 17(a)(1) and (3) of the Securities Act and Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The final judgment also orders Lahr to disgorge ill-gotten gains of $976,879 plus $179,888 in prejudgment interest, for a total of $1,156,767, which will be offset by the forfeiture and restitution ordered in the parallel criminal action. 

In a related administrative proceeding, the SEC today issued an order permanently suspending Lahr from appearing and practicing before the SEC as an attorney.
Ajay Sharma, the director and owner of APS Technology, a telemarketing call center located in New Delhi, India, pled guilty in the United States District Court for the Eastern District of New York to conspiracy to commit wire fraud. As alleged in part in the DOJ Release;

[S]harma was a leader and organizer of the fraud scheme.  Between January 2018 and September 2018, operating from call centers in India, the defendants targeted victims in the United States and falsely claimed to be employees of the Internal Revenue Service, the Social Security Administration or the Drug Enforcement Administration.  The victims were informed that they owed a sum of money to the United States government or one of its agencies and that they would be arrested if the debts were not promptly paid.  After the victims wired payments to bank accounts that the defendants had opened in the names of inactive and shell corporations to receive the fraud proceeds, the funds were withdrawn and laundered through additional bank accounts.  The scheme is estimated to have netted over $2 million from victims across the United States.
Hitesh Madhubhai Patel, a/k/a Hitesh Hinglaj, 44, pled guilty in the United States District Court for the Southern District of Texas to conspiracy to commit identification fraud, access device fraud, money laundering, and impersonation of a federal officer or employee; and he was sentenced to 20 years in prison plus three years of supervised release $8,970,396 in restitution. As alleged in part in the DOJ Release:

[P]atel and his co-conspirators perpetrated a complex scheme in which employees from call centers in Ahmedabad, India, impersonated officials from the IRS and U.S. Citizenship and Immigration Services (USCIS), and engaged in other telephone call scams designed to defraud victims throughout the United States.  U.S. victims were threatened with arrest, imprisonment, fines or deportation if they did not pay alleged monies owed to the government.  Those who fell victim were instructed how to provide payment, including by purchasing general purpose reloadable (GPR) cards or wiring money.  Upon payment, the call centers would immediately turn to a network of "runners" based in the United States to liquidate and launder the fraudulently obtained funds.

In his plea, Patel admitted to operating and funding several India-based call centers from which the fraud schemes were perpetrated, including the call center HGLOBAL.  Patel corresponded by email and WhatsApp messaging frequently with his co-defendants to exchange credit card numbers, telephone scam scripts, and call center operations instructions.  The scripts included IRS impersonation, USCIS impersonation, Canada Revenue Agency impersonation, Australian Tax Office impersonation, payday loan fraud, U.S. Government grant fraud, and debt collection fraud.

A co-defendant described Patel as "the top person in India and the boss for whom most of the other defendants worked," and the owner of multiple call centers.  Another co-defendant stated that Patel was arrested in India in 2016, but then paid a bribe and was released.  Additionally, Patel admitted that a reasonably foreseeable loss of more than $25 million but less than $65 million was attributable to him, based on the government's evidence against him.  

Patel was prosecuted in the United States after being extradited from Singapore in April 2019 to face charges in this large-scale telefraud and money laundering scheme.  Singapore authorities apprehended Patel at the request of the United States pursuant to a provisional arrest warrant in September 2018, after Patel flew there from India.

The indictment in this case, which was unsealed in October 2016, charged Patel and 60 other individuals and entities with general conspiracy, wire fraud conspiracy and money laundering conspiracy.  A total of 24 domestic defendants associated with this transnational criminal scheme were previously convicted and sentenced to terms of imprisonment of up to 20 years in the Southern District of Texas, District of Arizona and Northern District of Georgia.  The defendants were also ordered to pay millions of dollars in victim restitution and money judgments and to forfeit seized assets. Some defendants were ordered to be deported based on their illegal immigration status, with another defendant having his U.S. citizenship revoked due to a separate conviction for immigration fraud.  Charges remain pending for other India-based defendants.  They are presumed innocent unless and until convicted through due process of law.
In a Complaint filed in the United States District Court for the Southern District of Florida, the SEC alleged gthat Brothers Investment Group International, Inc. n/k/a Brothers International Group, Inc., and the firm's Chief Executive Officer/President Anson Jean-Pierre violated the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Securities Exchange Act. As alleged in part in the SEC Release:

[B]etween August 2017 and November 2018, the defendants raised approximately $794,000 from over 200 mainly Haitian-American investors through sales of securities in the form of "membership interests." According to the SEC's complaint, the defendants misrepresented to investors that their money would be used to fund the development of various agricultural, real estate, energy, and banking projects, primarily in Haiti. As alleged in the complaint, however, that defendants only invested a portion of the investor funds in the projects while Jean-Pierre misappropriated about $284,000, or roughly 37%, of the investment proceeds and used the funds for an elaborate gala event, retail purchases, restaurants, travel and hotel charges, cash withdrawals, and payments to himself.

Judgment Entered in Microcap Pump and Dump Scheme Targeting Elderly Retail Investors (SEC Release)
The United States District Court for the Eastern District of New York entered a Consent Judgment against Garrett M. O'Rourke, who was enjoined from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder and of Section 17(a) of the Securities Act, and the registration provisions of Section 5 of the Securities Act. Further, the Court imposed a pennystock Bar and ordered O'Rourke to pay $5,763,719 in disgorgement and prejudgment interest. O'Rourke and Michael J. Black were also charged in a parallel criminal action. As alleged in part in the SEC Release:

[O'Rourke] worked with Maryland resident Michael J. Black to fraudulently sell the stock of several microcap companies to investors, including elderly retail investors, using high-pressure stock promotional campaigns. The complaint alleged that O'Rourke engaged in unsolicited cold calls to prospective investors, telling the investors that he had found promising investment opportunities. In actuality, O'Rourke sought to convince the investors to buy the stocks so that he and the people who hired him could sell their holdings in the same stocks for a profit. O'Rourke and Black also allegedly schemed to disguise their control over at least one microcap company in order to facilitate their illegal sales of the company's stock, generating millions of dollars in proceeds.