Institutional Investors

Investor Fraud Claims Include Kiddar Capital and Stanford Ponzi Scam

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

$20M Ponzi Scam Results in Guilty Plea for Kiddar Capital Founder

Todd Hitt, Kiddar Capital’s founder and a member of a prominent commercial real estate family in Virginia, has pleaded guilty to criminal fraud charges accusing him of operating a $20M Ponzi fraud that involved several schemes. According to prosecutors, Hitt solicited about $30M from investors and then proceeded to use most of the money to fund his lavish lifestyle while using newer investors’ funds to pay older investors. He also allegedly made “false statements and material omissions” to investors when he didn’t tell them that their money was comingled with unrelated projects and not just the real estate and venture capital investments for which their funds were supposedly designated.

The U.S. Attorney’s Office for the Eastern District of Virginia contends that because of Hitt’s “fraudulent conduct,” investors lost about $20M. He is facing up to 20 years behind bars and is expected to pay a fine of millions of dollars. He previously settled related civil fraud charges filed against him by the US Securities and Exchange Commission.

Philadelphia Sues Citigroup, Goldman Sachs, Bank of America and Other Big Banks, Alleges Municipal Bond Rigging

Published on: February 21, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The city of Philadelphia, Pennsylvania is suing Bank of America (BAC), Goldman Sachs (GS), Citigroup (C), Wells Fargo & Co. (WFC), Barclays Plc (BAR), JPMorgan Chase & Co. (JPM), and Royal Bank of Canada (RBC) for allegedly rigging rates for variable-rate demand obligations (VRDOs). Philadelphia had issued over $1.6B of these bonds.

VRDOs are tax-exempt municipal securities that can be redeemed by investors early because they are tendered to banks. The banks can then remarket the bonds to other investors while charging issuers a fee.

According to InvestmentNews, the city is looking to represent a number of hospitals, municipalities, and universities with its lawsuit. The complaint contends that the banks worked with each other to manipulate the VRDO rates in secret so they could make hundreds of millions of dollars in unearned fees. The alleged rigging occurred between 2/2008 and 6/2016. The collusion purportedly involved the banks agreeing not to compete against each other for re-marketing services.

Financial Firms: UBS Settles with Virginia’s Regulator over Broker’s Unsuitable Recommendations, FINRA Fines Texas Broker-Dealer $225K for Mutual Fund Sales Violations, and an Ex-Client Seeks $500K from Carson Wealth while Alleging Excessive Fees

Published on: February 19, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Virginia Regulator Fines UBS Financial After Its Broker Makes Unsuitable Recommendations

To settle charges brought by Virginia’s State Corporate Commission accusing a UBS (UBS) broker of making unsuitable recommendations involving gold and precious metals securities to 18 clients, UBS Financial Services will pay $319K—$289K to the clients and $30K to the state.

Virginia’s regulator contends that unsuitable recommendations were made in 2013 and 2014 and caused UBS clients to hold an overconcentration of these securities, which were not even suitable for some of them. The state said that this violated its securities rules.

Big Banks End 2018 Holding At Least $1.6B of Unsold Loans Involving Leveraged Buyout Debt

Published on: December 31, 2018 | by Shepherd Smith Edwards & Kantas, LLP

According to Bloomberg, market woes have left Goldman Sachs Group Inc. (GS), Barclays Plc (BARC), Bank of America Corp. (BAC), and other Wall Street banks unable to get rid of at least $1.6B of “unwanted leveraged buyout debt” as investors continue to run from high-risk assets in the wake of fears about the global economy. A leveraged buyout (LBO) involves the acquiring of a company using borrowed funds. The assets of the company that is acquired, as well as the acquiring company’s assets, usually serve as collateral. LBOs make it possible for companies to get involved in big acquisitions without having to use a lot of capital.

Bloomberg reports that as of the 22nd of December, at least four loan sales involving acquisitions and buyouts had yet to “clear the market” leaving banks with no choice but to retain the debt on their books, including:

· A group led by Goldman Sachs in charge of the financing for First Reserve’s acquisition of pipeline operator Blue Racer was expected to end the year holding a $516M loan.