Securities Industry Commentator by Bill Singer Esq

January 25, 2021

'Money Mule' indicted for mail fraud in scheme that stole more than $400,000 from elderly victims / Co-conspirators impersonated government agents claiming Social Security numbers had been compromised (DOJ Release)

Melissa Hodgman Named Acting Director of Division of Enforcement (SEC Release)

BREAKING NEWS: US Dominion, Inc. et al., Plaintiffs v. Rudolph W. Giuliani, Defendant (Complaint, United States District Court for the District of Columbia, 21-CV-00213) 
Plainfiffs seek $651,735,000 in compensatory damages and at least $651,735,000 in punitive damages. As alleged in part in the Complaint:

1. During a court hearing contesting the results of the 2020 election in Pennsylvania, Rudy Giuliani admitted that the Trump Campaign "doesn't plead fraud" and that "this is not a fraud case." Although he was unwilling to make false election fraud claims about Dominion and its voting machines in a court of law because he knew those allegations are false, he and his allies manufactured and disseminated the "Big Lie," which foreseeably went viral and deceived millions of people into believing that Dominion had stolen their votes and fixed the election. Giuliani reportedly demanded $20,000 per day for that Big Lie. But he also cashed in by hosting a podcast where he exploited election falsehoods to market gold coins, supplements, cigars, and protection from "cyberthieves." Even after the United States Capitol had been stormed by rioters who had been deceived by Giuliani and his allies, Giuliani shirked responsibility for the consequences of his words and repeated the Big Lie again. This defamation action follows. 

2. Dominion was founded for the purpose of creating a fully auditable paper-based vote system that would empower people with disabilities to vote independently on verifiable paper ballots.1 As it grew, Dominion developed technology to solve many of the technical and voter-intent issues that came to light as a result of the 2000 election. Its systems are certified under standards promulgated by the U.S. Election Assistance Commission ("EAC"), reviewed and tested by independent testing laboratories accredited by the EAC, and were designed to be auditable and include a paper ballot backup to verify results. Indeed, recounts of paper ballots have repeatedly shown that Dominion machines accurately counted votes in the 2020 election-conclusively disproving the election-fixing claims promoted by Giuliani and his allies. 

3. As a result of the defamatory falsehoods peddled by Giuliani-in concert with Sidney Powell, Russell Ramsland, L. Lin Wood, Mike Lindell, Patrick Byrne, Lou Dobbs, Fox News, Fox Business, Newsmax, One America News Network ("OAN"), The Epoch Times, and other like-minded allies and media outlets determined to promote a false preconceived narrative about the 2020 election-Dominion's founder and employees have been harassed and have received death threats, and Dominion has suffered unprecedented and irreparable harm.

4. Dominion brings this action to set the record straight, to vindicate the company's rights under civil law, to recover compensatory and punitive damages, and to stand up for itself, its employees, and the electoral process.
DOJ and the Federal Trade Commission ("FTC"), entered into settlements resolving the first enforcement actions pursuant to the Better Online Ticket Sales ("BOTS") Act, which was intended to to prevent ticket brokers from buying large numbers of event tickets and reselling them to interested customers at inflated prices.  A keystone of the BOTS Act is its prohibition against the circumvention of ticket-purchasing limits. In Complaints filed in the United States District Court for the Eastern District of New York, Defendants Just In Time Tickets Inc., and its owner Evan Kohanian; and Concert Specials Inc. and its owner Steven Ebrani; and Cartisim Corp, and its owner Simon Ebrani were charged with having allegedly circumvented Ticketmaster's restrictions on users holding multiple accounts by creating accounts in the names of family members, friends, and fictitious individuals, and using hundreds of credit cards.  Further, the Defendants are charged with the alleged use of ticket bots to fool tests designed to prevent nonhuman visitors.  Finally, Defendants are charged with using programs to conceal the IP addresses of the computers they used to make purchases. 
READ the Complaints:
  • Concert Specials
  • Just In Time
  • Cartisim
As alleged in part in the DOJ Release: 

The three stipulated orders entered by the court assess civil penalties of $11.2 million against Just In Time Tickets Inc. and Kohanian, $16 million against Concert Specials Inc. and Steven Ebrani, and $4.4 million against Cartisim Corp. and Simon Ebrani, allowing suspension of a portion of such civil penalties if the defendants satisfy certain terms.  The orders further provide for the suspension of the remainder of such civil penalties if the defendants pay $1,642,658.96, $1,565,527.41, and $499,147,12, respectively, and satisfy certain additional terms.  The stipulated orders also contain terms to prohibit the defendants from using ticket bots or other computer programs to defeat access controls, from concealing the IP addresses of computers they use to make ticket purchases, and from purchasing tickets from any credit or debit account in the name of anyone other than the defendants or their corporate officers and employees.  Under the terms, the defendants must also maintain records and provide compliance reports to the government.
In an Indictment filed in the United States District Court for the Western District of Washington, Arifkhan Pathan was charged with two counts of mail fraud. As alleged in part in the DOJ Release:

[I]n November 2020, investigators with Homeland Security Investigation and the Seattle Police Department became aware of suspicious packages arriving at Seattle UPS and FedEx locations.  The investigation revealed the packages were filled with cash and were sent by victims from as far away as New York, Texas, and Colorado.  The packages were sent to conspirators who used fake identity documents, such as driver's licenses, to pick-up the packages.  According to multiple victims in the case, they had received a telephone call from someone who claimed to be employed by the Social Security Administration.  The caller claimed the victim's Social Security number had been compromised, and the only way to protect the victim's money was to withdraw thousands of dollars in cash from their bank accounts and send it via UPS or FedEx to an "agent" elsewhere in the U.S. for safe-keeping.  The callers allegedly demanded the victims withdraw as much as $30,000 in cash.  The scammers used UPS and FedEx so the co-conspirators could track the packages and pick-up the packages of cash using the fake identity documents.  The investigation revealed the callers were connected to an overseas call center.  PATHAN was allegedly a key player in the scheme, who recruited others to pick up packages of cash using fake identity documents. 

PATHAN deposited the money in various bank accounts that could be accessed by his co-schemers.  He was paid a commission on the money of about two percent.  When PATHAN's residence was searched in early January, investigators seized additional false identity information and a ledger that revealed PATHAN had picked up and allegedly transferred at least $400,000 to his co-schemers.

Swampscott Man Charged with Bank Fraud (DOJ Release)
In a Complaint filed in the United States District Court for the District of Massachusetts, Felix Gorovodsky was charged with one count of bank fraud. As alleged in part in the DOJ Release:

[G]orovodsky previously served as a financial advisor and power of attorney, with fiduciary responsibilities, for the elderly victim. The elderly victim, however, terminated that advisor relationship and revoked the power of attorney in July 2019.  Approximately nine months after he was notified that the victim had terminated the relationship, Gorovodsky accessed and liquidated the victim's bank account, transferring more than $250,000 of the victim's retirement assets into his own bank account. Gorovodsky then used the stolen funds for personal expenses, including paying off more than $100,000 in federal student loans.  To legitimize the transfer, Gorovodsky forged the victim's signature on a purported "gift letter," that he sent to the bank in an attempt to legitimize the fraudulent transfer.
If your pocket has been picked, your first reaction is likely shock and anger. Then you want to find out who did it and exact some revenge. More often than not, your wallet's gone, your cash has been spent, and someone is online racking up charges on your stolen credit cards. Other than fuming, there's probably not much you can do. In a modern-day version of pick-pocketing, two brokerage firms got hit by fraudsters. One firm was targeted by cybercriminals, who traded via hacked customer accounts. The other firm was targeted by someone using a fake identity to open an account and trade through it. Apparently, two random frauds but for the fact that some of the losing trades in the hacked accounts may have generated winning trades in the fake-identity account. All of which seemed to invite a claw-back of sorts. Or so one of the firms argued.
SEC Division of Enforcement Associate Director Melissa R. Hodgman has been named the Division's Acting Director.  In 2008, Hodgman began working in the Enforcement Division as a staff attorney, joined the Market Abuse Unit in 2010, and was promoted to Assistant Director in 2012. 
Bill Singer's Comment: Every so often, someone deserving of promotion (who has actually worked in the trenches) manages to get a much-deserved promotion. Such is the case with Acting Director Hodgman. It always nice to see that a promotion was "earned" rather than bestowed as a favor upon some outside, political hack. Hopefully, change is afoot at the SEC. Sadly, the cynic in me expects otherwise but, sometimes, life is full of surprises.
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, George William Magladry, III submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC alleges that George William Magladry, III entered the industry in 1988 and by August 2018, he was associated with Centaurus Financial, Inc. The AWC alleges that Magladry "does not have any relevant disciplinary history." In accordance with the terms of the AWC, FINRA found that Magladry violated Article V, Section 2(c) of FINRA's By-Laws and FINRA Rules 1122 and 2010; and the self regulatory imposed upon him a  $5,000 fine and a six-month suspension from associating with any FINRA member in any capacity. The AWC alleges that:

On November 16, 2018, a criminal complaint was filed in San Joaquin County, California, charging Magladry with two felony counts of making Criminal Threats. At the time the charges were filed, Magladry was aware of the felony charges and was required to amend his Form U4 within 30 days to disclose the charges. Magladry has willfully failed to disclose the felony charges on his Form U4.

On February 7, 2019, Magladry entered a no contest plea to one of the felony charges. At the time Magladry entered the plea, he was aware of the plea and was required to amend his Form U4 within ten days to disclose the no contest plea. Magladry willfully failed to disclose the felony plea on his Form U4 until September 16, 2019, approximately seven months after he was required to make the disclosure. 

By willfully failing to amend his Form U4 to disclose his felony charges and willfully failing to timely amend his Form U4 to disclose his no contest plea, Magladry violated Article V, Section 2(c) of FINRA's By-Laws, and FINRA Rules 1122 and 2010. 

Additionally, the AWC contains the following acknowledgment:

Respondent understands that this settlement includes a finding that he willfully omitted to state a material fact on a Form U4, and that under Section 3(a)(39)(F) of the Securities Exchange Act of 1934 and Article III, Section 4 of FINRA's By-Laws, this omission makes him subject to a statutory disqualification with respect to association with a member.