SEC Obtains Final Judgment Concluding Fraud Case Against Co-Founder of Real Estate Crowdfunding Portal (SEC Release)Federal Court Orders Alabama Company and its Owner to Pay Over $1.1 Million for Commodity Pool Fraud (CFTC Release)
[T]he six defendants fraudulently sold stock in a Florida company called Social Voucher.com, Inc. ("Social Voucher") that was later referred to as Stocket, Inc. ("Stocket"). The indictment alleges that in 2013, Parker, the Chief Executive Officer of Social Voucher and Assenza, the Director of Technology, created Social Voucher to develop a mobile gaming application which was intended to combine online gaming and online shopping. Social Voucher was supposed to earn revenue from users of the mobile application buying products while using the application.Parker hired boiler room salespeople, including Geraci, Romeo, Paul Vandivier, and Cindy Vandivier, to personally solicit investors and hire other sales agents to solicit, offer, and sell shares of Social Voucher stock to investors via telemarketing, according to the indictment. All six defendants allegedly informed investors that their money would be used to develop the mobile gaming application. But Parker, as alleged in the indictment, paid kickbacks and undisclosed commissions of thirty (30) to fifty (50) percent of the investor funds raised by the boiler rooms for Social Voucher that were concealed from the investors. Geraci, Romeo, Paul Vandivier, and Cindy Vandivier sometimes falsely held themselves out to investors as employees of the company.The indictment further alleges that the defendants made a number of other material misstatements to the Social Voucher investors, including failing to inform investors that Parker in fact used investor funds to gamble at the casino; concealing Assenza's criminal convictions for securities fraud and money laundering and Parker's civil securities fraud judgment; and concealing prior regulatory fraud actions against Romeo, Paul Vandivier, and Cindy Vandivier. At times, according to the indictment, Romeo, Paul Vandivier, and Cindy Vandivier used aliases or names different than the names listed on the publicly filed regulatory actions against them when soliciting potential investors or answering investors' questions.The six defendants and others raised approximately $21 million in funds from Social Voucher investors. At no point did the Social Voucher mobile gaming application generate any revenue or profit.
The court's order stems from a 2019 enforcement action that charged Butler and NCI with fraudulent solicitation, misappropriation, and registration violations. [See CFTC Press Release No. 8070-19] The court previously entered an order granting a permanent injunction against Butler and requiring him to pay a combined $755,000 in restitution and civil monetary penalty for his violations of the Commodity Exchange Act and CFTC regulations. [See CFTC Press Release No. 8184-20]The order finds that from March 16, 2017, through February 21, 2018, NCI, through Butler, unlawfully solicited and accepted $294,545 from 70 members of the public to trade binary options contracts on the North American Derivatives Exchange (Nadex), defrauded those customers, and operated as an unregistered commodity pool operator.Case Background
The order finds that NCI, through Butler, misrepresented that for customer deposits between $500 and $5,000, he would pool those customers' funds into a single trading account at Nadex, and Butler, acting as the trader for NCI, would use those funds to trade binary options on the customers' behalf. The order also finds that NCI, through Butler, misrepresented that it would deposit each customer payment of $5,000 or more into separate customer trading accounts at Nadex, and Butler would manage and trade binary options on behalf of customers. Rather than trade customer funds as promised, NCI instead misappropriated most, if not all of the funds for Butler's personal benefit, including spending tens of thousands of dollars on jewelry, purchases at Apple stores, and Toys "R" Us gift cards.
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In February 2017, Ambrosole entered into an AWC with FINRA through which he consented to findings that he executed five unauthorized trades in a customer's account in October 2015, in violation of FINRA Rule 2010, Ambrosole was suspended from associating with any FINRA member firm in 411 capacities for one month, fined $5,000, and ordered to pay restitution to the affected customer in the amount of $645.97, plus interest.
During the relevant period, Ambrosole engaged in quantitatively unsuitable trading in two customer accounts. The first belonged to an elderly customer (Customer A), who was 78 years old when he opened the account. Prior to the relevant period. Customer A began to sustain permanent, progressive, neurological and cognitive impairments. Customer A's account had an average monthly equity of approximately $300,000 and, during the relevant period, Ambrosole recommended and executed 157 trades, which caused Customer A to pay more than $126,000 in commissions and other trading costs. Ambrosole's recommended trades resulted in an annualized cost-to-equity ratio of approximately 20 percent, which means that Customer A's account would have had to grow by more than 20 percent annually just to break even. The second account belonged jointly to Customer A and his wife (Customer B); Customer B was a senior with limited investment knowledge and experience. Customer A and Customer B's joint account had an average monthly equity of approximately $70,000. During approximately one year in the relevant period (specifically, from July 2019 to June 2020), Ambrosole recommended and executed 40 trades in this account, which caused Customer A and Customer B to pay more than $20,400 in commissions and other trading costs. Ambrosole's recommended trades resulted in an annualized cost-to-equity ratio of approximately 35 percent in the joint account. Customer A and Customer B relied on Ambrosole's advice and accepted his recommendations. Collectively, Ambrosole's recommendations caused Customer A and Customer B to pay $147,031.50 in commissions and other trading costs during the relevant period. 1= = = = =Footnote 1: On March 15, 2021, Ambrosole, Joseph Stone, and the New Hampshire Securities Division entered into a consent agreement, through which, among other things, Ambrosole consented to findings that he traded the same accounts discussed above in a quantitatively unsuitable manner. That agreement ordered Ambrosole and Joseph Stone to pay restitution, which Ambrosole and Joseph Stone thereafter paid.