SEC Enforcement

$5.4M Senior Investment Fraud Allegedly Involved Penny Stocks

Published on: November 29, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In US district court, the Securities and Exchange Commission has filed a complaint accusing two people of senior investment fraud. According to the regulator, Angela Beckcom Rubbo Monaco and Joseph A. Rubbo of Florida bilked investors through offerings involving three of their companies.

The SEC’s complaint said that the two of them raised at least $5.4M from 11 mostly older investors. The money was supposed to go toward growing their entertainment businesses and help them develop the Spongebuddy, which was a “sponge-like” glove. Instead, claims the agency, Monacco and Rubbo misappropriated over $2.6M in investor money to pay themselves and family members, as well as to buy a car and cover other unrelated expenses. They also allegedly used the funds to pay “undisclosed sales commissions” to Steven J. Dykes, who solicited investors through cold calls.

The Commission stated that during the alleged senior investment fraud, all three defendants were not registered with the regulator. The companies owned by Rubbo and Monaco that are said to have been involved are VIP Television Inc., VIP TV LLC, and The Spongebuddy LLC.

Ponzi Scams: DOJ Begins Paying Distributions to Madoff Victims, Real Estate Investment Scam Allegations Lead to Guilty Plea, and SEC Seeks to Shut Down $38M “Ad Packs” Scheme

Published on: November 28, 2017 | by Shepherd Smith Edwards & Kantas, LLP

DOJ Begins Distributing Payments to Bernie Madoff’s Victims

Nearly nine years after Bernie Madoff was arrested for running a multi-billion dollar Ponzi scam, the US Department Justice has begun to pay out distributions owed to his victims. The money comes from the Madoff Victim Fund, a $4B fund set up for settlements paid by JPMorgan Chase & Co. (JPM), which was the bank that the Ponzi mastermind used, and the estate of Jeffry Picower, who was one of Madoff’s longtime customers.

This fund will pay back over 24,000 victims some $772M during the first round of distributions. Another fund, which is supervised by bankruptcy court, has already paid out over $10B to investors. Investors who will be paid by from Madoff Victim Fund are those that did not qualify for recovery under the bankruptcy proceedings.

NY Woman Pleads Guilty to Running An Investment Scam

Alisa Adler has pleaded guilty to two counts of wire fraud. Adler is the ex-head of ASG Real Estate Services Group.

SEC Cases: $15.7M Final Judgment Issued in Ponzi Scam that Touted Loans to Athletes, MicroCap Issuer is Accused of Accounting Scheme, and Company’s Assets are Frozen in the Wake of Alleged $5.3M Offering Fraud

Published on: November 25, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Regulator Orders Alleged Ponzi Scammers to Pay $15.7M Plus Interest
In its final judgement against ex-pro football player William D. Allen, Susan Daub, and three entities, the US Securities and Exchange Commission is ordering the defendants to pay over $15.7M in disgorgement of ill-gotten gains in addition to prejudgment interest for an alleged Ponzi scam that raised nearly $32M from investors. Allen, formerly of the Miami Dolphins, and Daub, who both pled guilty to related to criminal charges last year, have been sentenced to six years in prison. They must pay $16.8M in restitution for that action. The SEC’s order will be deemed met “based on the restitution order” in the criminal case.

The SEC’s complaint contends that Daub and Allen and the entities misled investors about the loans, which were supposed to go to professional athletes. Instead, they allegedly used just part of the money to issue the loans while using investors’ funds to cover nightclub and casino expenses, other ventures, and to pay back other investors.

Microcap Issuer and Its Ex-CEO Resolve Investor Fraud Allegations
Integrated Freight Corporation and its ex-chairman/CEO David N. Fuselier have settled SEC charges accusing them of investor fraud. Both Fuselier and the company, however, did not deny or admit to the allegations.

Securities Firms: JP Morgan Securities to Pay $1.25 For Inadequate Background Checks of Thousands of Employees and Gray Financial Group Settles with SEC Over Unsuitable Investments to Pension Funds

Published on: November 22, 2017 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Orders JPMorgan Securities to Pay $1.25M
The Financial Industry Regulatory Authority said that J.P. Morgan Securities LLC (JPM) will pay $1.25M for not conducting proper background checks—or, in certain instances, conducting them but not in a timely enough manner—from 1/2009 through 5/2017 on 8,600 of its associated persons that were non-registered. According to the self-regulatory organization, this included the failure to properly fingerprint about 2,000 non-registered associated persons. The lapses kept the brokerage firm from knowing whether these individuals should be disqualified from employment.

Meantime, other non-registered associates persons who were fingerprinted were only screened for criminal convictions as they related to federal banking laws, as well as to list that was “internally created.” Still, said FINRA, four people who warranted disqualification due to a prior criminal conviction were allowed to work as non-registered associated persons.

Under federal securities laws, breakage firms must fingerprint certain associated staff even if they are employed in a non-registered manner because they could still pose a risk to customers otherwise. Fingerprinting allows for the identification of folk convicted of past crimes that may disqualify them from working for a firm in an associated role.

SEC Cases: NY Town Accused of Municipal Securities Fraud, Jay Peak Owner Accused in $200M Immigrant Visa Fraud Arrives at Tentative Settlement, and Financial Judgment is Reached in $110M Investor Fraud Against Inofin

Published on: November 21, 2017 | by Shepherd Smith Edwards & Kantas, LLP

SEC Files Fraud Charges Against Oyster Bay, NY

The US Securities and Exchange Commission has filed municipal securities fraud charges against the New York City of Oyster Bay along with John Venditto, who was a former supervisor of the town. According to the regulator, the Long Island Town and Venditto defrauded investors through 26 municipal securities offerings from 8/2010 to 12/15. A parallel criminal action has been brought against the ex-town supervisor.

The regulator’s complaint claims Oyster Bay and Venditto hid a number of side deals with a businessman who ran concession stands and restaurants at local facilities. Part of the deals included agreeing to “indirectly guarantee” a number of private loans totaling over $20M to this vendor. “Gifts, bribes, kickbacks, and political support” also were allegedly involved.

Investment Adviser Faces Charges That He Bilked Older Investors of $5.2M

Published on: November 21, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Daniel Glick, a Chicago investment adviser, is charged with wire fraud over allegations that he stole about $5.2M from elderly clients, including the parents of his wife. Glick was the owner of Glick & Associates Ltd., Glick Accounting Services, and Financial Management Strategies Inc.

He allegedly began bilking investors in 2011 through last April. The criminal information in his senior investor fraud case accuses Glick of promising clients that he would invest their funds and pay their bills but he instead created account statements that inflated investment balances while he used their money to buy a Mercedes, pay his mortgage, and pay back business loans. Glick is accused of making Ponzi-like payments to clients.

Among those whom he allegedly defrauded were his in-laws, whose signatures he is accused of forging to transfer their money to his own business account. They lost hundreds of thousands of dollars. Another family purportedly paid Glick $700K in fees even while he allegedly misappropriated hundreds of thousands of their dollars.

Texas Securities: Investment Adviser Suspended by State Commissioner, Lawyer Ordered to Pay Almost $180K in Disgorgement Plus Interest, and Houston Man Must Pay Almost $3.8M & Serve 46 Months in Prison for $6.4M Diamond Investment Scam

Published on: November 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Texas Investment Adviser Suspend for Violating Earlier Securities Agreement
The Texas State Securities Board has suspended investment adviser John Michael McDonough for 90 days after he violated a past agreement that limited his business activities and required 212 Advisory Group to enhance its supervision of him. The undertaking agreement was a requirement for him to be approved as a registered investment adviser in Texas in 2015 while he worked with the Georgia-based firm.

At the time, the Financial Industry Regulatory Authority had already sanctioned McDonough, who used to be registered with AXA Advisors, LLC, over allegations that he engaged in “outside business activities” and a number of undisclosed private securities transactions. He was fined $10K and suspended by the self-regulatory organization.

Earlier this year, the Texas State Securities Board found that McDonough was in total violation of the undertaking agreement. Meantime, 212 Advisory was found to have failed in making sure that McDonough did not engage in any supervisory-like acts nor did it ensure that a firm principal was appointed as his direct supervisor.

SEC Cases: Biotech Company Accused of Misleading Investors & Accounting Fraud, Millennium Management Resolves Illegal Short Selling Charges, Day Trader Alleged Engaged in Unauthorized Trades in Over 100 Brokerage Accounts, and Multiple Traders Allegedly Insider Traded Based on One Tip

Published on: November 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Day Trader is Accused of Unauthorized Trades to Inflate Stock Prices and Make Illegal Profits
The US Securities and Exchange Commission has filed civil charges against Joseph P. Willner accusing him of accessing over 100 brokerage accounts and making unauthorized trades. Meantime, prosecutors in NY, as well as the US Justice Department, have filed criminal charges against him.

The SEC contends that Willner used the allegedly unauthorized trades to inflate a number of companies’ stock prices. He then traded in these same securities in his accounts and made at least $700K in illicit profits.

Willner is accused of fraud and market rigging. The Commission wants back ill-gotten gains in addition to interest, penalties, and a permanent injunction.

Singer Financial Corp. Accused of Making Illegal Securities Offering of Promissory Notes to Unsophisticated Investors

Published on: November 15, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed civil charges against Singer Financial Corp. and its owner Paul Singer accusing them of illegally offering unregistered securities. The regulator’s complaint contends that they raised about $3.4M from at least 70 investors via unsecured promissory notes that were not registered while failing to qualify for an exemption from registration.

According to the Commission, Singer and his financial firm had at first tried for registration exemption for investment certificates that were almost identical to the promissory notes, but they gave up on their attempt and engaged in the illegal offering of the unregistered promissory notes instead. The SEC said that by not registering the promissory note offering with the regulator or obtaining qualification for registration exemption, investors were “deprived” of “critical information” about the risks involved in their investments. Also, investors in a previous offering ended up trading in their securities with promissory notes that had terms favoring Singer and his firm more than it did them. The notes also generally stretched out “repayment obligations.”

The SEC claims that Singer and his firm used marketing collateral that did not include financial statements, pervious performance facts, and other documents that are usually provided in such instances.

Ex- Investment Adviser is Accused of Defrauding Retirees of Over $1.85M

Published on: November 13, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed civil charges against a former broker and investment adviser. According to the regulator’s investment adviser fraud complaint, Jay Costa Kelter defrauded three retirees of over $1.856M. Meantime, prosecutors in Tennessee have filed a criminal case against him related to one of the clients. A federal grand jury indicted him on multiple counts of wire fraud, mail fraud, and security fraud.

The SEC contends that from 9/2013 through last year, Kelter, who owns insurance and investment firm BEK Consulting Partners LLC (known in the past as Kelter & Company LLC), made misrepresentations to the older investors, whom he’d persuaded in 2013 to transfer their accounts to TD Ameritrade (AMTD) after he left his former employer. The former broker had access to their new accounts and was authorized to keep giving them investment advice and make trades on their behalf while, meantime, he allegedly used the funds for himself.

For example, Kelter is accused of misappropriating $1.467M from a 75-year-old widow who was nearly totally financial dependent on her investments by engaging in fraud and forgery. The SEC’s complaint said that the client had told him she was only interested in making conservative investments.