Securities Industry Commentator by Bill Singer Esq

Who Opened What Type of Account Becomes a Dilemma in E*Trade Federal Court Motion (BrokeAndBroker.com Blog)

Johnston Man Sentenced for Bank Fraud (DOJ Release)

Two Men Are Facing Federal Charges In Connection With Multi-Million Dollar Investment Scheme (DOJ Release)

Florida man who defrauded elderly investors with fake commodities investment scheme sentenced to prison / Over many years sent phony account statements and accepted more money, even though he was not successfully investing (DOJ Release)

SEC Awards $6,000,000 to Whistleblower Claimants and Denies Award to One Claimant

Order Determining Whistleblower Award Claims

FINRA Suspends Rep and Order Partial Restitution for Excessive Trading

In the Matter of Philip Marchese, Respondent (FINRA AWC)

[B]eginning in October 2020, while on federal supervised release, having been convicted of bank fraud and sentenced in 2019 for participating in a similar conspiracy, Nestor Concepcion, 26, arranged for and coordinated the deposit of multiple counterfeit checks with an intended loss to banks totaling $71,717.77.

[F]rom approximately 2009 to 2021, Hershey and Bradley induced dozens of victims to invest millions of dollars in unregistered securities offerings, promoted by the defendants through Performance Holdings and other entities controlled by the defendants and other individuals, including Performance Retire on Rentals, LLC, Distressed Lending Fund, LCC, Moteng Funding, LLC and Southeast Lot Acquisitions, LLC, among others.

The indictment alleges that the investment materials Hershey and Bradley provided to victim investors in connection with these securities offerings contained false and/or misleading statements and failed to disclose material information. For example, the indictment alleges that the offering materials failed to disclose that the defendants received commissions based on the amount of investments they sold, and often provided investors with offering materials that represented the opposite - that nobody would be paid a commission in connection with the investments. In fact, the indictment alleges, the defendants received commissions that were typically 10% of an investor's initial investment and often received an additional commission when an investor extended an investment. In this manner, Hershey and Bradley were paid millions of dollars in undisclosed commissions from the sale of securities. In addition to the commissions, the indictment also alleges that the defendants received regular undisclosed "management" fees from the various entities.

According to allegations in the indictment, as part of the scheme, Hershey and Bradley also failed to disclose to investors other material information, including negative information about the defendants' backgrounds and the financial woes faced by some of the entities for which they were soliciting investments. To the contrary, because the defendants often solicited the same group of investors to invest in the various projects, the defendants took steps to conceal such financial difficulties by making undisclosed loans to various entities so that the entities could, in turn, make their required interest payments to investors. The indictment also alleges that Hershey and Bradley solicited new investors and, contrary to representations they made to the investors, used the new investors' money to repay the loans and previous investors. The defendants also allegedly sent to investors periodic reports about the status of the investments that failed to include material negative information.

According to the indictment, in 2019, investors learned that several of the projects in which they had invested were in financial distress and could no longer meet their obligations to investors, which totaled several million dollars. 

[B]etween 2011 and 2018, White solicited funds from investors in Florida and Washington State.  White represented that he would use the money to successfully trade in futures contracts first under his own name, and later under the name of his company, M.W. Global Futures LLC, of which he was the sole member.  White claimed to have expertise as a commodities trader, with special training.  He also claimed to be a member of the Chicago Board of Trade.  All of these claims were false.

White provided promotional materials that claimed his trading would provide a high return on investment.  In October 2017, he sent one elderly investor a brochure claiming a return on investment in excess of 16% annually.   Once he got their funds, White sent investors statements purporting to show substantial trading activity and profits.  The statements also showed White's commissions, which were allegedly tied to the level of profits.  White sent some of these fictitious statements via email, constituting wire fraud.  Very little of the money was actually traded in investment accounts, and the investments that were traded resulted in losses.

Of the $1.29 million, White repaid approximately $425,000 as redemptions and purported profits during the scheme.  In November 2018, White was contacted by investigators from the Commodity Futures Trading Commission.  He then repaid an additional $602,000 to two victims.  White owes the remaining $281,970 in restitution to his victims.  According to White's defense counsel, he is paying $80,000 towards that restitution amount today, before his prison term.

[C]laimant 1 provided staff with key documents that led the staff to seek additional documents from the respondent, which formed the core of the Commission's case. Claimant 1 also provided ongoing assistance to the staff as the investigation progressed, providing documents and information to assist the staff's understanding of the respondent's business practices. With regard to Claimant 2, we considered that Claimant 2's information provided valuable first-hand accounts of the respondent's wrongdoing, and that Claimant 2 was familiar with the respondent's systems and business processes. Claimant 2 was also interviewed by the staff and provided continuing assistance, including on-the-record testimony. 

Unless Claimant 1 or Claimant 2, within ten (10) calendar days of the issuance of this Order, makes a joint request, in writing, for a different allocation of the award, the Office of the Whistleblower is directed to pay each member of Claimant 1 individually one-half of their joint award and to pay each member of Claimant 2 individually one-third of their joint award.

• Securities Industry Commentator
• Bill Singer