Securities Industry Commentator by Bill Singer Esq

Claimant alleged that Respondents allowed an unnamed party to use the Company as a conduit 

In the Matter of the Arbitration Between Donna J. Wagner, Claimant, v. Brokers International Financial Services, LLC and Mark Christopher Perry, Respondents (FINRA Arbitration Award)

Human Resources Manager Pleads Guilty to Defrauding Employer Through Payroll and COVID-19 Testing Schemes (DOJ Release)

CEO of San Diego Startup Sentenced for Bilking more than $1.5 Million from his Company (DOJ Release)

CFTC Orders Connecticut Firm to Pay $500,000 for Wash Sales (CFTC Release)

Zoom Arbitration One Year Later: Lessons Learned, Tips for Practitioners and the Road Ahead (FINRA Unscripted)

FINRA Publishes Helpful Notice About Online Account Takeover (ATO) (BrokeAndBroker.com Blog)

[T]he causes of action related to Claimant's allegation that, while a registered representative of BIFS, Perry was the President of an insurance brokerage firm ("Company"). Claimant further alleged that Respondents allowed an unnamed party to use the Company as a conduit to obtain funds from Claimant and convert those funds for his own personal use and that Perry, who was responsible for its operations oversight, appears to be complicit

First, beginning in at least May 2020 and continuing through August 2020, Wold committed wire fraud by submitting fraudulent payroll requests for individuals who never worked at Fry Foods or who no longer worked at Fry Foods at the time of the payroll requests. Payroll checks were processed based on Wold's requests. Wold then deposited these fraudulent payroll checks into his own bank accounts.

Second, Wold committed mail fraud with respect to a COVID-19 testing program at Fry Foods' Weiser, Idaho location in May 2020. Wold issued a fraudulent invoice to Fry Foods in the name of his business, Hala Lallo Health, for $39,995 when, in fact, the testing was provided by another entity and at a greatly lower cost. When Fry Foods paid Hala Lallo Health for the testing, Wold deposited the funds into a bank account he controlled and the company that actually provided the testing was not paid.

Wold committed the offense of engaging in monetary transactions in property derived from unlawful activity by transferring $69,116.48 in proceeds from his frauds for the purchase a speedboat and trailer.

[A]t the time of Fildey's crime, GoFormz had had raised several rounds of outside funding and appeared to be a start-up success story. Fildey stole the funds despite earning a six-figure salary, and used the stolen funds to support a luxurious lifestyle, including the purchase of a $20,000 diamond ring, fancy vacations, an Audi, and recurring transfers to a woman with whom he was having an extramarital affair.  According to public records, GoFormz Inc., founded in 2012, is a San Diego company that provides online mobile forms.

According to Fildey's plea agreement and court records, beginning on or before September 30, 2015, and continuing through August 12, 2017, Fildey used various methods to defraud GoFormz.  His deceptive ways included obtaining loans, supposedly on the company's behalf, but then taking the funds for himself; putting personal expenditures on GoFormz credit cards which the company then paid for; obtaining cash advances for himself on GoFormz credit cards; and simply stealing money directly from the company's bank account.

Fildey took out a total of three unauthorized loans on behalf of GoFormz, totaling approximately $600,000, and transferred the funds to his personal bank account shortly after the loaned funds were transferred to GoFormz.  In addition to the loans, Fildey withdrew over $700,000 in cash from the GoFormz bank account for his personal use and made over $2,600 in unauthorized purchases on the GoFormz corporate credit card. 

According to Court records, the company discovered Fildey's deception when its payroll bounced in July 2017, and the company realized it had only approximately $9,000 in its bank account.  As a result of Fildey's conduct, the company had to fire 12 of its 42 employees and its valuation plummeted.

[S]ummerHaven engaged in multiple wash sales and non-competitive transactions while moving positions held by a client from one futures commission merchant (FCM) to another. Specifically, on July 2, 2018, SummerHaven placed offsetting buy and sell orders at each FCM, resulting in a series of pre-arranged offsetting trades in contracts for crude oil, heating oil, gasoil, live cattle, lean hogs, soybean meal, gasoline, cocoa, and cotton. In total, SummerHaven made more than 100 non-competitive prearranged trades with an aggregate value of more than $570 million. The order finds that SummerHaven failed in its supervisory duties because it did not have policies or procedures in place to prohibit wash sales or non-competitive transactions, and because the decision to execute wash sales and non-competitive transactions was reviewed and directed by senior supervisory management, including SummerHaven's then-Chief Compliance Officer and then-Managing Partner.

The pandemic forced the world to re-evaluate how it works in a number of ways-and FINRA's Arbitration & Mediation Forum is no exception. To keep processes moving, FINRA Dispute Resolution Services allowed hearings to proceed virtually. Now, a year later, we are looking at lessons learned, tips for practicing in a remote environment and plans for the future of arbitration and mediation. 

On this episode, we are joined by Richard Berry, Executive Vice President of FINRA's Dispute Resolution Services, and two practitioners, Sam Edwards, a partner with the securities litigation and arbitration law firm Shepherd, Smith, Edwards and Kantas, and Beverly Jo Slaughter, senior managing counsel with Wells Fargo's Wealth Investment Management Litigation group. 

• Securities Industry Commentator
• Bill Singer