Broker Fraud

Investor Files GPB Private Placement Claim Against Kalos Capital

Published on: September 16, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Tennessee investor is pursuing a Financial Industry Regulatory Authority (FINRA) arbitration claim against Kalos Capital, Inc. and its broker Martin Hunter McFarlin for the more than $100K in losses that he sustained from investing in non-traded real estate investment trusts (non-traded REITs) and the GPB Capital Automotive Portfolio. Now, the claimant is alleging omissions, misrepresentations, gross lack of supervision, unsuitable recommendations, and due diligence failures. Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) is representing this individual in his case against Kalos and McFarlin.

Our client is a divorced dad, a small business owner, and an unsophisticated investor, which is why he turned to McFarlin and Kalos several years ago to help him invest his retirement money for him and his family. During seminars and company Christmas parties, the claimant was told that private placements were safe alternative investments.

Private Placements Are Risky Investments

Investor’s GPB Private Placement Claim Against Arkadios Capital Gets FINRA Hearing

Published on: September 13, 2019 | by Shepherd Smith Edwards & Kantas, LLP

An investor who filed an arbitration claim against Arkadios Capital for selling her GPB Capital Holdings private placements now has a hearing date set before a Financial Industry Regulatory Authority (FINRA) panel: April 20, 2020. This is one of the first GPB investor fraud case brought against a brokerage firm to get a hearing scheduled before one of the self-regulatory authority’s (SRO) arbitrators. Our broker fraud lawyers at Shepherd Smith Edwards and Kantas, LLP (SSEK Law Firm) are representing this claimant.

The investor, who is a woman from the greater Atlanta, Georgia area, is claiming hundreds of thousands of dollars in retirement fund losses after her financial adviser, an Arkadios broker, recommended the GPB securities to her. While with the broker-dealer, her portfolio became especially concentrated in private placements, including the GPB Holdings II Limited Partnership. Now, the claimant is contending that this GPB investment, in particular, was an extremely unsuitable recommendation for her, especially since it involved her IRA from which no losses can be offset.

Our client maintains that she was not aware of the risks involved in the investment strategy used by her Arkadios broker. She is alleging unsuitable recommendations, omissions, misrepresentations, gross negligence, due diligence failures, breach of fiduciary duty, negligence, and inadequate supervision. The investor is seeking damages, interest, and costs.

Ex-Cetera Broker from Texas is Accused of Defrauding Investors

Published on: September 13, 2019 | by Shepherd Smith Edwards & Kantas, LLP

If former Cetera Advisers broker James Christopher Hayne has handled your investments and you suffered investment losses that you suspect were due to fraud or negligence, you should speak with an experienced stockbroker fraud law firm right away. Over the years, Hayne, a Texas broker, has been named in numerous customer arbitration claims brought before the Financial Industry Regulatory Authority (FINRA).

With 17 years in the industry, Hayne, previously was a registered broker with Questar Capital, First Allied Securities, Edward Jones, and Morgan Stanley. His BrokerCheck record shows nine customer disputes, five of which were settled.

Most recently, there was the Financial Industry Regulatory Authority claim brought against Hayne by a customer that was resolved for $325K. The former client had requested $100K in damages. In that investor fraud case, Hayne was accused of violating both the Texas Securities Act and California Corporate Securities Law, breaching contractual duties to the claimant, negligence in the way he handled the latter’s account, and causing the customer to suffer investment losses.

Ex-Morgan Stanley Broker Pleads Guilty to Investment Adviser Fraud

Published on: September 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Former Morgan Stanley (MS) broker who was barred by the Financial Industry Regulatory Authority (FINRA) last year has pleaded guilty to defrauding his clients of hundreds of thousands of dollars. Elias Herbert Hafen was a registered Morgan Stanley rep. from 2009 until 2018 and then briefly went to work for Wells Fargo Clearing Services. According to his BrokerCheck record, Wells Fargo (WFC) fired him after just several months because he had financial agreements with clients that the firm never approved.

A news release of Hafen’s guilty plea on Justice.gov states that between 2013 and 2018, Hafen defrauded at least 11 financial advisory clients by fooling them into thinking he was able to access a high yield investment fund that came with guaranteed investment returns. This fund, however, was not affiliated with the investment bank where Hafen was a registered broker. In fact, it did not exist.

Because of Hafen’s investment advice, a number of his clients moved hundreds of thousands of dollars to his own bank account, from where he was supposed to invest in the fund. Instead, he generated fake bank statements using the name of an investment company that didn’t exist and, rather than use investors’ funds as intended, Hafen spent their money to fund his luxury lifestyle.

UBS Yes Strategy Investors File Fraud Claims

Published on: August 31, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Clients of UBS Group AG (UBS) who employed the firm’s Yield Enhancement Strategy (YES) are now filing investor fraud complaints after suffering at least $60M in losses to date. YES involves options trades and borrowing that was supposed to be “safe” and low risk while earning investors positive returns.

The complex investment strategy did just that while the market was stable but the volatility that ensued last year–the worst to hit the market in 30 years– caught investors by surprise. The Wall Street Journal reports investor losses of over 13% in one month alone. However, Seeking Alpha reports that losses have been as high as 20% for some investors.

For example, according to the WSJ, Sherrie Pellini, a 60-year-old UBS customer who financially supports her mom and three kids, invested $3M in the UBS YES Strategy and was charged 1.75%. She now claims her losses were $750K. Pellini is accusing UBS broker Robert Perlman of telling her that YES had not resulted in any losses for 17 years.

Sagepoint Financial and Royal Alliance Sold GPB Private Placements to Investors

Published on: August 30, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Two broker-dealers, Sagepoint Financial and Royal Alliance, recently made headlines after investors who bought GPB Capital Holdings private placements from them sued the alternative asset firm in a class action securities fraud case. GPB Capital Holdings, which invests in waste management and car dealerships, is accused of operating a $1.8B Ponzi scam.

The lead plaintiffs of the first class action securities lawsuit are Karen Loch of Georgia and Victor Wade of Texas. They invested in two GPB funds–$50K in GPB Holdings II for Wade that he purchased through Sagepoint Financial and $75K in GPB Automotive Portfolio for Lock through Royal Alliance Associates.

GPB Holdings II and GPB Automotive are GPB’s two largest funds, with both having raised over $600M from over 6000 investors. The two funds are not listed or traded on any exchange. In May, InvestmentNews reported that their assets were over $10M and they had at least 750 shareholders, thus requiring them to be registered with the US Securities and Exchange Commission (SEC). Still, GPB failed to register both funds by their April 30, 2018 deadline and no annual reports have been filed since. This failure has kept Lock, Wade, and thousands of other investors from receiving even the most basic information about both funds and their money.

Former Broker Pleads Guilty in Castleberry Financial Fraud

Published on: August 26, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Scott P. Strochak, an ex-broker, has pleaded guilty to criminal charges related to his involvement in the $3.8M Castleberry Financial Services Fraud. He is also now facing parallel civil fraud charges brought by the US Securities and Exchange Commission (SEC).

Prosecutors charged Strochak, who was the Director of Alternative Investments and a Senior EVP at Castleberry Financial Services Group, and two other firm executives earlier this year over the scam, which promised 8-12% yearly returns on bond-like investments while touting a robust business that was handling hundreds of millions of dollars in capital and had over 300 investors. The fraud raised almost $3.8M from at least 17 investors.

According to the SEC, Strochak, former Castleberry CEO Norman Strell, and ex-President T. Johnathan Turner made misrepresentations to prospective investors, including that its investments were insured and bonded by top insurers like Chubb Group and CNA Financial Group. They allegedly continued to make these representations even after some investors complained that they never received evidence of said insurance.

Alleged Unauthorized Trades by IFS Securities Trader Causes $10M in Losses

Published on: August 20, 2019 | by Shepherd Smith Edwards & Kantas, LLP

According to InvestmentNews, IFS Securities, a broker-dealer based in Atlanta, Georgia, may be facing at least $10M in losses after Keith Wakefield, the firm’s ex-municipal securities principal, allegedly executed unauthorized trades and shorted Treasury bonds. He was fired earlier in August 2019.

IFS Securities is owned by IFS Group Inc. The brokerage firm reportedly notified the Financial Industry Regulatory Authority (FINRA), the US Securities and Exchange Commission (SEC), and the Federal Bureau of Investigation (FBI) about the significant losses it sustained due to the unauthorized securities transactions that reportedly did not involve any customer assets. IFS Group works with institutional investors.

Wakefield was with IFS Securities since 2011. His BrokerCheck record cites allegedly making fake trades and fraud as the reasons for his termination. With 19 years as a registered broker, Wakefield was previously with Cabrera Capital Markets, LaSalle Financial Services, and ABM Amro Inc.

Two Former Brokers Sentenced in Multimillion-Dollar Ponzi Frauds

Published on: August 13, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Dawn Bennett, an ex-financial advisor and broker, is sentenced to 20 years in prison for operating a $20M Ponzi scam that involved 46 investors. She also must pay $14.5M in restitution and forfeit another $14M.

Many of Bennett’s victims were retirees who heard about her because she hosted a radio show. In 2018, Bennett was convicted by a jury on federal charges of conspiracy, bank fraud, securities fraud, wire fraud, and making false statements on a loan application.

According to evidence given at trial, Bennett solicited investors for her online clothing business DJB Holdings, LLC, also known as DJBennett.com, touting a 15% yearly interest rate through promissory and convertible notes.

Ex-Wells Fargo Broker and Advisor Are Accused of Misconduct

Published on: August 9, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has taken action against two former Wells Fargo (WFC) representatives. Ex-broker Michael Garris has been suspended for a year after the self-regulatory organization found that he made 26 unauthorized trades in the account of a client who he knew had died.

Garris was fired by Wells Fargo over a year ago. According to FINRA, he made more than $9K in commissions from the unauthorized transactions in late 2017, several months after the client’s nephew had notified him of the death. Garris failed to tell the brokerage firm of the client’s passing.

Wells Fargo has since refunded the commissions that Garris made from the transactions, reversed the transactions that were not authorized, and placed the account back to its former positions from before the customer died.