Securities Industry Commentator by Bill Singer Esq

January 28, 2021

Joint Statement Regarding Ongoing Market Volatility by Acting Chair Allison Herren Lee; Pete Driscoll, Director, Division of Examinations; and Christian Sabella, Acting Director, Division of Trading and Markets (SEC Release / January 27, 2021)

SEC Charges New Jersey Insurance Agent with Defrauding Investors (SEC Release)

Marketing Company Agrees to Pay $150 Million for Facilitating Elder Fraud Schemes / Victims of Schemes to Receive $127.5 Million (DOJ Release)

Joint Statement Regarding Ongoing Market Volatility by Acting Chair Allison Herren Lee; Pete Driscoll, Director, Division of Examinations; and Christian Sabella, Acting Director, Division of Trading and Markets (SEC Release / January 27, 2021)

We are aware of and actively monitoring the on-going market volatility in the options and equities markets and, consistent with our mission to protect investors and maintain fair, orderly, and efficient markets, we are working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants.

Bill Singer's Comment: Y'know -- I've never been a fan of telling folks not to worry because when you do that, well, funny thing, folks tend to worry first and then quickly slide into full-blown panic. Truly, I wish that the SEC didn't issue a joint statement about market volatility because that all reminds me of all those statements in February 2020 about how the government was aware and actively monitoring the COVID virus, and, there were a lot of meetings, and, over the last ten years we lost 360,000 to the flu, so, hey, we've only got a total of 15 people with COVID and they're recovering except for one who's pretty sick. In case you forgot, this was from February 26, 2020:
In a Complaint filed in the United States District Court for the District of New Jersey, the SEC charged Ivan Ramos with violating the antifraud provisions of Section 17(a) of the Securities Act and Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder. Ramos has consented to the entry of a judgment that imposes a permanent injunction, with monetary relief to be determined at a later date. Ramos pled guilty in a parallel criminal action.  As alleged in part in the SEC Release:

[F]rom approximately August 2017 to July 2020, Ramos, an insurance agent at a large, well-known insurance company, lured several of his clients and other acquaintances into investing approximately $1 million through a pair of firms, Invexperts, LLC and Wealth Seeds Capital, LLC. The complaint alleges that Ramos falsely promised investors in Invexperts - a company wholly owned by a friend of Ramos's - a conservative, safe investment, with a guaranteed 5% return. The complaint further alleges that the investors from whom Ramos solicited funds were inexperienced and put their trust in Ramos as an agent of the well-known insurance company. As alleged, however, Ramos actually intended to use funds he solicited for Invexperts to finance a restaurant venture that he knew involved significant risk, and in fact used investors' funds to operate the restaurant, purchase real estate, and pay his personal expenses. The complaint alleges that when the restaurant failed to turn a profit, Ramos created and solicited investments in Wealth Seeds. According to the complaint, Ramos falsely pitched Wealth Seeds as a safe investment, but used funds invested in Wealth Seeds to repay Invexperts investors.

As Previously Reported in the "Securities Industry Commentator":, Ivan Ramos pled guilty to one count of securities fraud. As alleged in part in the DOJ Release;

Ramos, who worked at New York Life selling life insurance, sought out inexperienced investors seeking low-risk investments. The victims met Ramos after purchasing life insurance through him, or through New York Life marketing events, or through mutual acquaintances. Ramos led his victims to believe, through misrepresentations and omissions, that two entities that he controlled, Invexperts LLC and Wealth Seeds Capital LLC, were associated with New York Life when they were not. The victims believed that the money they entrusted to Ramos would be placed in investments through New York Life, and accordingly multiple victims referenced New York Life on the memo line of their investment checks. One victim, for example, attended a New York Life seminar, then subsequently met with Ramos at his office in Edison, and ultimately invested in Invexperts believing it was associated with New York Life.

Ramos falsely told victims that their investments in Invexperts and Wealth Seeds were no-risk with fixed annual returns. Instead of investing their money as he promised he would, Ramos used the funds for purposes not disclosed to the victims, including, among other things, to pay for personal expenses for Ramos and others, to develop a restaurant called "Frisky Bull Barbeque" in Elizabeth, New Jersey, and to repay other investors. 

Ramos obtained over $1 million in investor money through the fraudulent scheme.
In an Information filed in the United States District Court for the District of Columbia, Epsilon Data Management LLC was charged with one count of conspiracy to commit mail and wire fraud; and, the company entered into a Deferred Prosecution Agreement ("DPA") with the Consumer Protection Branch of the Justice Department's Civil Division and the U.S. Attorney's Office for the District of Colorado The DOJ Release asserts in part that:

Under the terms of the DPA, which the parties submitted to the district court in Denver on Jan. 19, 2021, Epsilon agreed to pay a total of $150 million, with $127.5 million of that amount going to compensate victims of the fraudulent schemes that used consumer data sold by Epsilon. Epsilon also agreed to implement significant compliance measures designed to safeguard consumers' data and prevent its sale to individuals or entities engaged in fraudulent or deceptive marketing campaigns. Further, the DPA requires Epsilon to maintain a procedure for consumers to request that it not sell their information to others.

Headquartered in Irving, Texas, with its principal sales office in Westminster, Colorado, Epsilon used sophisticated data modeling to identify consumers most likely to respond to its clients' marketing solicitations. As part of the DPA, Epsilon admitted that, from July 2008 through July 2017, employees in its Direct to Consumer (DTC) Unit knowingly sold modeled lists of consumers to clients engaged in fraud. In particular, Epsilon acknowledged that the DTC Unit sold consumer lists to a number of mass-mailing fraud schemes that sent false "sweepstakes" and "astrology" solicitations to consumers. Those solicitations stated that each consumer recipient had won a large prize or individualized psychic service that they could obtain by paying a fee. In reality, the solicitations - as known to DTC Unit employees - were mass-produced mailings and victims who paid a fee received nothing of value. As reflected in the consumer lists sold by the DTC Unit to perpetrators of the fraud schemes, the schemes disproportionately affected the elderly and other vulnerable individuals.

The consumer data sold by the DTC Unit to fraudsters came both from other fraudulent clients and from legitimate Epsilon clients, including non-profit and charitable organizations. DTC Unit employees continued to sell consumer data to clients engaged in fraud despite knowing that those and similar clients had been arrested, charged with crimes, convicted, and otherwise subject to law enforcement actions for false and misleading practices. Epsilon admitted that the DTC Unit sold more than 30 million consumers' data to fraudulent schemes.

Investment Fraudster Sentenced / Adviser Who Claimed to Invest in Fracking Defrauded Unsuspecting Family (FBI Release)
An FBI Release unfolds the tale of fraudster Michael Van Auken, who falsely claimed to be a lawyer and an accountant offering investment expertise to his victims.  As noted in part in the FBI Release:

Investigators began digging into the financials and learned that where the actual money went was not consistent with what the documents said.

The family collectively lost more than $700,000. Much of that was the woman's parents' retirement accounts, and some of the funds belonged to the original victim herself and her young adult children.

The impact was devastating. While the younger victims will have time to recover financially, the woman's parents are now deceased, and they lost their entire retirement savings. They'd hoped to pass those funds on to their children and grandchildren.

Additionally, Van Auken claimed to be paying taxes on the family's funds, but he never did. So the surviving relatives are also dealing with tax debt, Sampson said.

Van Auken pleaded guilty in January 2020 to wire fraud, money laundering, and filing a false tax return. In May 2020, he was sentenced to 28 months in prison.
In a Complaint filed in the United States District Court for the District of New Jersey, the SEC charged Vuuzle Media Corporation and its founder,, Ronald Shane Flynn a/k/a Ronnie Shane with violating the antifraud and registration provisions of the federal securities laws; and also charged Richard Marchitto with aiding and abetting Vuuzle and Flynn's violations. As alleged in part in the SEC Release:

[B]etween 2016 and 2020, Vuuzle and Flynn raised more than $14 million from individual investors using a boiler room of salespeople employing high-pressure tactics, based primarily in the Philippines.  According to the complaint, Vuuzle and Flynn promised investors that Vuuzle was a legitimate and growing company and a "pre-IPO" investment opportunity when in fact Vuuzle has never made a profit and has never made a public offering on any stock exchange.  As alleged, only a small fraction of investor funds went towards the online streaming business.  The complaint further alleges that Flynn misappropriated $4.9 million of investor funds for his personal use, including by using it to pay for jewelry, luxury flights and hotel stays, subscriptions to dating websites, and nightclub visits.  Vuuzle and Flynn also allegedly used at least $5.5 million of investor funds to sustain the boiler room and pay commissions to Flynn and others for recruiting investors.  The complaint also charged Richard Marchitto with aiding and abetting Flynn and Vuuzle's fraud by allegedly acting as their U.S. corporate and financial presence and maintaining a U.S. bank account, corporate credit cards, and a New York office address for Vuuzle.
FINRA says that there is going to be a new Form U4 or, at least the form itself may not really be changing, but it will be more digitized and functional, and, well, you know, someone decided that the older, online document needed more bells and whistles, and then, when we log back onto the old, comfortable version, we find a new, unfamiliar version, and we can't quite figure out how to use the newer iteration, but, sure, over time, we get a handle on things, and after a lot of cursing and revised versions and updates, we figure out what we need to do, but we never quite understand why they futzed with something that was perfectly serviceable for a long time notwithstanding that they published an explanation that sort of seemed like it made sense, but for the fact that it doesn't but, hey, like I'm going to admit that I'm the only one befuddled by all the techy-sounding verbiage?
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.