Financial Advisor of Global Investment Bank Sentenced in Federal Court in Maryland to Five Years in Prison for $6 Million Wire Fraud and Investment Adviser Fraud Scheme / Virginia-based Financial Advisor in Wealth Management Section of Bank Used Stolen Victim Funds to Pay His Own Lifestyle Expenses, Including Country Club Membership Fees (DOJ Release)Former Oil Trader Pleads Guilty to Commodities Price Manipulation Conspiracy / A California man pleaded guilty Wednesday to a multiyear conspiracy to engage in commodities price manipulation. (DOJ Release)CFTC Charges Former Fuel Oil Trader with Manipulating Fuel Oil Benchmark / Trader Admits to Manipulative and Illegal Conduct, Enters into a Cooperation Agreement (CFTC Release)
Nigerian National in Collin County Sentenced for Multimillion-Dollar Fraud and Money Laundering Scheme Which Victimized Senior Citizens, School Districts, and Charities / Defendant Engaged in Identity Theft, Cyber Fraud, and Elder Fraud, Laundering Money for Overseas Co-Conspirators - Ordered to Serve 34 Years in Prison and Repay Close to $2 Million (DOJ Release)
Six Individuals Charged with Using Various Online Scams to Defraud Victims of More Than $4 Million (DOJ Release)
Heightened Threat of Fraud / FINRA Alerts Firms to Recent Increase in ACH "Instant Funds" Abuse (FINRA Regulatory Notice)
[F]rom August 7, 2006 to April 29, 2011, and again from November 16, 2011 to July 29, 2019, Carter was employed by a financial institution and worked primarily out of the financial institution's Tysons Corner, Virginia location. In 2012, Carter was promoted to financial adviser in the wealth management section of the financial institution and was registered to sell securities and act as an investment adviser in Maryland and Virginia, among other locations. Carter managed and had authority over multiple investment accounts maintained by Victims 1 through 5 (as listed in the indictment) with the financial institution, which contained a mix of assets including securities and cash deposits. As a financial adviser, Carter was required to manage the victim accounts in the best interests of his clients, consistent with their investment objectives, and not for his personal benefit.As detailed in the statement of facts, from at least October 2007 to at least July 2019, Carter made numerous unauthorized transactions from the victim accounts for his personal benefit, defrauding Victims 1 through 5 of at least $5 million. To effect the unauthorized wire transfers, Carter caused the submission of an internal bank authorization form that falsely stated that Carter had received verbal client instructions from each victim authorizing the transfer at a specific date and time. Carter caused the wire transfers to be sent to his personal accounts and used the money to pay for his lifestyle expenses, including Carter's mortgage, credit card bills, and country club membership fees.Carter's fraud was first discovered when Victim 1 and her adult daughter attempted to obtain a bridge loan from the financial institution to cover relocation expenses to an assisted living facility in Florida until the sale of Victim 1's home in Columbia, Maryland, was completed. When they applied for the loan, Victim 1 and her daughter discovered that an $800,000 loan had already been obtained in Victim 1's name, without Victim 1's knowledge or permission. The financial institution determined that the disbursement of the loan proceeds went to Carter's personal bank account and that Carter used his personal e-mail address in furtherance of the fraud. The financial institution then learned that Carter had transferred approximately $5 million in unauthorized funds associated with clients of the financial institution.On July 29, 2019, Carter was fired from the financial institution. On August 2, 2019, during a call with employees from the financial institution, Carter admitted that he had defrauded the five victims over a period of years, that he had forged clients' signatures on bank authorization forms, that he had created false financial statements to disguise his theft, and in some cases had mailed those financial statements. With respect to Victim 1, Carter further admitted that he had met with the victim at her home and answered Victim 1's phone in order to authorize the transactions, unbeknownst to Victim 1. Carter did this in order to overcome the financial institution's multi-factor verification system required to execute the transactions.According to the plea agreement, during the course of the scheme, Carter made at least 53 unauthorized transfers from his clients' accounts to his own accounts. In addition, Carter admitted that he embezzled more than $50,000 from a non-profit sports organization located in Loudoun County, Virginia. In all, Carter stole at least $6,149,162.77. Prior to his offenses being detected, Carter caused $1,794,052.38 to be returned to the victims. After learning that his fraud had been discovered, in October 2019, Carter also repaid the non-profit organization for its loss. Of the total amount repaid, $1,118,318.52 was repaid through transfers Carter made from other victim accounts.
Both men admitted that they concealed critical defects in Lucent's business when they orchestrated the sale of the company to a private equity firm in late 2013 for over $64 million. Kuhnash and Jimerson claimed that Lucent could produce specialized plastics products that consistently met or exceeded customer specs at very low prices by using low-cost, recycled materials.Lucent's internal testing showed that many of its most profitable products often failed to meet specifications. This information was hidden from customers and Lucent shipped the products with a fabricated set of test results that falsely claimed the product was within specifications.Kuhnash and Jimerson became aware of all of this in the months leading up to the sale of the company. Both men admitted to being aware of an email from a whistleblower employee who disclosed what he described as "ethical/conscience issues" and "a level of dishonesty" at Lucent. The email described the fraud that Lucent was perpetrating on its customers, including the manipulated test results, and lying to customers. Jimerson agreed with Kuhnash to not forward the email or let anyone know they received it.Kuhnash and Jimerson never disclosed the fraud during their company sales pitches or the due diligence process leading up to Lucent's sale to the private equity firm. After the company was sold, both Kuhnash and Jimerson lied to the private equity firm's outside auditor about whether they were aware of any fraud at Lucent.As executives, both men owned stock in Lucent. From selling the company, Kuhnash personally received approximately $1,393,000 and Jimerson received approximately $632,000.The private equity firm that bought Lucent later sold it to a publicly traded plastics company. Lucent's fraud on its customers was later discovered by that publicly traded company. On the day that Lucent's fraud was publicly disclosed to investors, the company's stock price fell by over 20%, or over $175 million in shareholder value.
was employed as a trader at Company A, an oil trading company, and later at Company B, a multinational commodity trading company, after it had acquired Company A. Between approximately September 2012 and August 2016, Heredia conspired with other employees at Company A, and later at Company B, to manipulate the price of fuel oil bought from, and sold to, a particular counterparty, Company C, through private, bilateral contracts.Heredia and his co-conspirators sought to unlawfully enrich themselves, Company A, and Company B by increasing profits and reducing costs on the fuel oil contracts with Company C. The price terms of the contracts were set by reference to the daily benchmark price assessment published by S&P Global Platts (Platts) for intermediate fuel oil 380 CST at the Port of Los Angeles (Los Angeles 380 CST Bunker Fuel) on a certain day or days plus or minus a fixed premium. As part of the price manipulation conspiracy, Heredia directed his co-conspirators to submit orders to buy and sell (bids and offers) to Platts during the daily trading "window" for the Platts Los Angeles 380 CST Bunker Fuel price assessment with the intent to artificially push the price assessment up or down.For example, if Company A or Company B had a contract to buy fuel oil from Company C, Heredia directed his co-conspirators to submit offers during the Platts "window" for the express purpose of pushing down the price assessment and hence the price of fuel oil bought from Company C. The bids and offers were not submitted to Platts for any legitimate economic reason by Heredia's and his co-conspirators, but rather for the purpose of artificially affecting the Platts Los Angeles 380 CST Bunker Fuel price assessment so that the benchmark price, and hence the price of fuel oil that Company A or Company B bought from, and sold to, Company C, did not reflect legitimate forces of supply and demand.
The order finds that from as early as June 2012 through at least August 2016, Heredia and others at the firms where he was employed sought to increase profits from their oil products trading by manipulating a U.S. price-assessment benchmark relating to physical fuel oil products in order to benefit the firms' trading positions. Heredia also engaged in this conduct with the specific intent to manipulate the benchmark, and could and did create artificial prices.The order recognizes Heredia's entry into a formal cooperation agreement with the Division of Enforcement and his undertaking to continue to cooperate with the Division in connection with the subject matter of the order.
[A]derinoye would obtain fake passports in the names of others. He would then use those fraudulent passports and the identifying information of others to establish false business entities and fraudulent bank accounts. To this date, 13 individual aliases, 12 business aliases, and over 40 fraudulent bank accounts have been tied to Aderinoye, and there is evidence to suggest more aliases exist. Once Aderinoye would open the fraudulent bank accounts, co-conspirators would engage in various business email compromise scams and telephone compromise scams to defraud individuals and businesses out of money. In these scams, co-conspirators would pose as a known individual and direct the targeted victims to wire or send funds to Aderinoye or the fraudulent accounts Aderinoye had set up. Once the ill-gotten money posted in Aderinoye's fraudulent accounts, he would immediately withdraw the funds, transfer the monies to other fraudulent accounts, or wire them internationally to a bank account he had set up in Nigeria. The illicit proceeds were used to pay off co-conspirators and further fund their fraudulent schemes. From June 2018 through September 2019, over $6.7 million was deposited into alias accounts of Aderinoye, with almost all of those funds being withdrawn or wired internationally. The victims of the BEC scams included school districts such as Community ISD, Project 4031, a non-profit organization that helps families of the terminally ill, an individual whose identity was used to drain his retirement account, and an elderly man who had over $352,000 stolen from his investment account. The investigation is ongoing, as co-conspirators and victims continue to be identified.
[T]he defendants allegedly participated in a series of romance and other online scams designed to defraud victims into sending money to accounts and debit cards controlled by them. Romance scams occur when a criminal adopts a fake online identity to gain a victim's affection and trust. The scammer then uses the illusion of a romantic or close relationship to manipulate and/or steal from the victim. To carry out the schemes here, the defendants allegedly used fake passports in the names of numerous aliases to open bank accounts in and around Boston to collect and launder the proceeds of the romance scams. The defendants then allegedly executed large cash withdrawals from those accounts, often multiple times on a single day and generally structured in amounts less than $10,000, in an effort to evade detection and currency transaction reporting requirements. The accounts allegedly were also used to collect fraudulent pandemic unemployment benefits in the names of Massachusetts beneficiaries who did not apply for such benefits. Across the romance and unemployment schemes, more than $4 million in fraud proceeds was deposited into accounts allegedly controlled by defendants.
FINRA warns member firms that, over the past two months, we have observed a sharp increase in new customers opening online brokerage accounts and engaging in Automated Clearing House (ACH) "instant funds" abuse to effect securities trading. (FINRA has previously warned firms about trends in losses from schemes involving electronic funds transfers, such as those involving outbound wire transfers and ATM withdrawals.)Some firms provide individuals opening a brokerage account online with instant access to funds ("instant funds"), allowing those customers to trade in their online accounts as soon as they enable ACH transactions, i.e., without having to wait for the payment to settle. The amount of "instant funds" a customer may access varies from firm to firm. While ACH "instant funds" availability has been misused in the past, the recent increase in these events appears correlated to the recent market volatility driven by social media interest in certain securities. Some discussions on social media include descriptions of the "instant funds" policies of specific firms.With ACH "instant funds" abuse, a malicious actor will open a brokerage account online or through an application-typically in his or her legal name or, in more limited circumstances, using a stolen or synthetic identity- and will add a bank account to engage in ACH transactions. The malicious actor will then submit a request to the firm to request an ACH transfer (or "pull") from the linked bank account while also using the "instant funds" to immediately place orders to buy securities. After the orders are executed, the firm will receive a "Non-Sufficient Funds" (NSF) or a "Fraud" message from the bank that was expected to send the ACH-resulting in losses for the firm after it recalls the ACH transaction and is forced to sell out of the malicious actor's position(s).FINRA urges firms to evaluate and, as appropriate, mitigate the potential financial risk they face in light of the increase in "instant funds" abuse. This could include adjusting the amount of available "instant funds," delaying the ability to place orders with unsettled funds or by enhancing their account validation processes.In addition, firms that have experienced instant funds abuse should consider whether the activity triggers a Suspicious Activity Report (SAR) filing obligation. The Bank Secrecy Act and its implementing regulations require financial institutions to report suspicious transactions to the Financial Crimes Enforcement Network (FinCEN) using SARs.. . .
In May 2015, FINRA accepted an AWC in which Reynolds was censured and fined $10,000 for failing to disclose to Spartan for approximately two years an outside brokerage account that he maintained in violation NASD Rule 3050 and FINRA Rule 2010.
From January 3, 2017 through February 28, 2019, Reynolds executed 580 non-bona fide matched trades between his proprietary inventory account at Spartan and six outside brokerage accounts that Reynolds controlled in a relative's name. Reynolds executed the trades so that it would appear to Spartan's clearing firm the he was a net purchaser and the clearing firm would not purchase shares on Spartan's behalf (i.e., conduct a "buy-in") pursuant to its regulatory obligation to close-out fails-to-deliver within the timeframe required by Rule 204 of Securities and Exchange Commission Regulation SHO ("Rule 204").1 In addition, Reynolds executed 507 matched trades between his Spartan account and his accounts to compensate an account that lost money as a result of price changes in the matched trades he executed to avoid a buy-in. As a result, Reynolds violated FINRA Rules 5210 and 2010.Between 2014 and February 28, 2019, Reynolds failed to disclose the six brokerage accounts to Spartan even though he traded in those accounts at his own discretion; and he failed to disclose his association with Spartan to the firms where his accounts were held. As a result, Reynolds violated NASD Rule 3050(c) (for conduct prior to April 3, 2017), FINRA Rule 3210 (for conduct on or after April 3, 2017), and FINRA Rule 2010.Finally, on one occasion, Reynolds impersonated his relative in a telephone call with a brokerage firm where the relative held one of the six accounts. As a result, Reynolds violated FINRA Rule 2010.= = = = =Footnote 1: 1 Reynolds executed short sales in his Spartan account as a registered market maker. Rule 204(a)(3) of Regulation SHO, promulgated pursuant to the Securities Exchange Act of 1934, provides that "[i]f a participant of a registered clearing agency has a fail to deliver position at a registered clearing agency in any equity security that is attributable to bona fide market making activities by a registered market maker . . . the participant shall by no later than the beginning of regular trading hours on the third consecutive day following the settlement date, immediately close out the fail to deliver position by purchasing or borrowing securities of like kind and quantityt."