Securities Industry Commentator by Bill Singer Esq

DOJ RELEASES

Former New Jersey Man Sentenced to Federal Prison for Role in Scheme to Defraud Elderly Oregonian (DOJ Release)

Rhode Island Man Pleads Guilty to Charges for Swindling Victims Who Thought They Were Investing in 'Magic Mike' Stage Show (DOJ Release)

SEC RELEASES

SEC Charges Incarcerated Felon and Five Friends in $2 Million Fraud Scheme (SEC Release)

SEC Order $10 Million Whistleblower Award to Claimant 

Order Determining Whistleblower Award Claims

CFTC RELEASES

FINRA RELEASES

FINRA Fines and Suspends Rep for Cutting and Pasting Customer Signatures

In the Matter of Trent J. Davis, Respondent (FINRA AWC)

FINRA Fines and Suspends Rep for OBA

In the Matter of Penny S. Morgan, Respondent (FINRA AWC)

[M]autone was one of five individuals who together perpetrated a scheme to convince an elderly man to invest $1 million in a fraudulent high-yield international investment scam. In July 2015, one of Mautone's co-defendants, Jared Mack, 46, of Utah, made initial contact with the victim to pitch an investment opportunity claiming to produce weekly returns of 20%. Once the victim expressed interest in the purported investment opportunity - and produced evidence he had $1 million to invest - Mack introduced him to Mautone, the supposed connection to investment "platform partner," and codefendant Olabode Olukanni, 39, of New York.

For several months, Mautone and his co-defendants maintained frequent contact with the victim and repeatedly attempted to assure him, via a series of increasingly intimidating and pressure-laden communications, of the investment opportunity's legitimacy, low risk, and promised returns. Mautone made these false representations despite knowing that others had their money stolen by his supposed Hong Kong investment partner, and despite being convicted only two years earlier of wire fraud for pitching a similar high-yield investment scam in South Carolina. 

In December 2015, following this months-long pressure campaign, the victim wired $1 million to a bank account in Dubai, United Arab Emirates, which was controlled by codefendant Rovshan Bahader Oglu Qasimov, 38, of Azerbaijan. Qasimov immediately withdrew the money and used it to purchase gold from a jewelry store in Dubai. The victim never saw his money again, nor did he receive the promised investment returns.

Santilli managed and partly owned Aloris Entertainment, LLC, which acquired an interest - through securities called "Class A Units" - in Mike's Mobile Detailing, LLC, the company that operates the "Magic Mike Live" stage show, which is based on two "Magic Mike" movies that chronicle the life of a male stripper.

From June 2016 to February 2020, Santilli raised funds from victims by soliciting investments in "Aloris Magic Mike LP," a different business that he falsely told investors owned the Class A Units. Santilli lied to investors, telling them that, in return for their investment, they would receive "shares" in Aloris Magic Mike LP that corresponded to a particular number of Class A Units and entitled them to a percentage of the profits from "Magic Mike Live." To bolster his false claims, Santilli used a doctored legal document that made it appear that Aloris Magic Mike LP was a shareholder of Mike's Mobile Detailing

Santilli misappropriated a significant portion of his victims' investments, including by withdrawing more than $1 million at casinos across the United States, where he used investors' money for gambling. To raise more funds, Santilli falsely told his victims that new investment opportunities had arisen, resulting in Santilli selling shares in his businesses that corresponded to nearly double the number of Class A Units of Mike's Mobile Detailing that his company actually owned.

In total, Santilli caused approximately $4,258,679 in losses to his victims.

[F]rom May 2019 to early January 2021, Syed Arham Arbab, 25, and five others made more than $2 million in bogus deposits from empty or underfunded bank accounts into various brokerage accounts to deceive broker-dealers into providing instant deposit credit for online securities trading. The complaint alleges that Arbab and his fellow participants, which included his high school and college friends and a relative, received more than $1.5 million in instant deposit credit that they used to make unfunded online trades, which caused affected broker-dealers to lose at least $146,660. The complaint alleges that, in some instances, Arbab's co-defendants gave Arbab their brokerage account log-in credentials so that he could personally engage in freeriding using their accounts, while, in other instances, Arbab coached such individuals in real time through text messages about how to freeride using their own accounts. Arbab allegedly conducted this scheme just before starting his prison sentence for another securities related scheme. The SEC previously charged Arbab in 2019 for running a Ponzi scheme from his fraternity house near the University of Georgia campus-for which he began serving a five-year sentence in January 2021, after he pleaded guilty in a parallel criminal case by the U.S. Attorney's Office for the Middle District of Georgia.

[(1)] Claimant's information was of great significance to the investigation, and there is a close nexus between Claimant's allegations about certain Redacted and those charges in the Covered Action; (2) Claimant provided substantial assistance by providing important documents and meeting twice with Enforcement staff; and (3) the law enforcement interests here are high, as Claimant's information led to the return of a significant amount of money to harmed investors. 

From October 2019 through February 2020, Davis forged 181 firm documents by cutting and pasting customers' signatures from previously executed documents. These documents included, among others, Broker/Dealer Change Requests, Client Information and Suitability profiles, IRA Rollover Disclosures and Acknowledgements, Change of Beneficiary forms, and IRA/ESA Distribution Requests. Although Davis' customers did not give prior permission for the use of their signatures, they authorized the activity set forth on the forms in question. 

Therefore, Davis violated FINRA Rule 2010. 

Moreover, by forging the documents identified above, Davis caused Cambridge to maintain inaccurate books and records. 

Therefore, Davis also violated FINRA Rules 4511 and 2010. 

Morgan engaged in two business activities that were outside the scope of her relationship with Royal Alliance without providing prior written notice to the firm. First, from February to April 2017, Morgan provided services to two senior Royal Alliance customers in connection with the preparation of their house for sale and their transitioning to an independent-living facility. Morgan sent the customers an invoice for her services, which the customers paid. Second, in July 2021, Morgan provided services to another Royal Alliance customer in connection with the removal of a customer's property from a duplex the customer owned and rented out to others. Morgan also sent that customer an invoice for her services, which the customer paid. 

Morgan did not disclose either of these business activities, both of which were outside of the scope of her relationship with Royal Alliance, to the firm. On the contrary, between 2017 and 2020, Morgan also completed annual compliance questionnaires for Royal Alliance in which she attested that she had disclosed all of her disclosed outside business activities when, in fact, she had not disclosed to the firm the two business activities described above. 

Therefore, Morgan violated FINRA Rules 3270 and 2010.

• Securities Industry Commentator
• Bill Singer