Securities Fraud

SEC Awards Two Whistleblowers $16M

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

The US Securities and Exchange Commision has awarded $16M to two whistleblowers—$8M each—for the crucial information and help they provided in bringing a successful securities enforcement action. If you consider that a whistleblower may be eligible for 10-30% of funds collected when the monetary sanctions of the SEC action that the individual helped to bring is greater than $1M, the sanctions imposed in this latest case must have been significant.

According to the regulator, one whistleblower reported a “particular misconduct” that became central to the SEC’s enforcement action. The other whistleblower provided additional key information and continued to cooperate with the agency during its probe. The latter’s contributions reportedly saved the Commission time and resources.

These latest awards bring the amount awarded to SEC whistleblowers—49 of them—to over $175M. Alleged wrongdoers accused in the regulators’ cases have been ordered to pay $1B in financial remedies, including over $671M in disgorgement.

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.

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.

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.

Credit Suisse Resolves NY Regulator’s Forex Rigging Probe for $135M

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

Credit Suisse AG (CS) has agreed to settle currency rigging charges brought by New York’s Department of Financial Services by paying $135M. According to the state regulator, from at least ’08 to ’15, the Zurich-based bank violated NY banking law and engaged in other “unlawful conduct” that “disadvantaged customers.”

The consent order states that Credit Suisse did not put into place controls over its FX business that were “effective.” Also, its traders are accused of the “inappropriate sharing” of information with other banks that could have resulted in exchange rate rigging, coordination of trades, and a rise in the “ bid/ask spreads” that were offered to the bank’s forex customers. The DFS probe said that these actions were geared toward creating more profit for Credit Suisse, while decreasing its losses and harming not just its own customers but the marketplace. Meantime, other banks that it may have colluded with also sought to profit.

Credit Suisse is one of several banks whose traders are accused of gathering in chat rooms to rig currency prices. According to Bloomberg, traders from Barclays PLC (BARC), JPMorgan Chase & Co. (JPM), and Citigroup (C) are waiting for their trials over allegations that they sought to manipulate currencies. To date, banks accused of currency rigging have paid $5.8M to the US Justice Department to settle charges.

SEC Orders 235 LLCs to Produce Documents Related to Its Woodbridge Fraud Probe

Published on: November 5, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In a subpoena enforcement action, the US Securities and Exchange Commission is ordering 235 LLCs in Colorado and Delaware to provide documents related to its probe into whether Woodbridge Group of Companies, LLC, a California-based real estate and investment company owned and run by its president Robert Shapiro, engaged in a $1B financial fraud. All of the entities, plus another LLC, are affiliated with Woodbridge. The regulator had subpoenaed the 236 of them for the documents in August. Only one LLC responded by the deadline.

Now, the Commission wants a federal district court to make the rest of the LLCs comply with the subpoenas. Meantime, Shapiro has invoked his Fifth Amendment right. However, he maintains that his company did not commit fraud.

SEC Has Been Probing Woodbridge Since 2016
For the past year, the regulator has been looking into looking into possible securities fraud by Woodbridge and others involving more than $1B that was provided by thousands of investors throughout the US. The alleged fraud may include unregistered securities sales, including securities sales by brokers who were not registered, and other fraud.

After Hurricane Maria, Mutual Fund Company Franklin Resources Sells Hundreds of Millions of Dollars of Puerto Rico Bonds

Published on: October 27, 2017 | by Shepherd Smith Edwards & Kantas, LLP

According to The Wall Street Journal, Franklin Resources Inc. (BEN), has sold hundreds of millions of dollars of Puerto Rico bonds in the wake of the devastation of Hurricane Maria. This includes Franklin Mutual Advisers LLC’s decision to sell its $294 million stake in the U.S. territory’s general obligation bonds.

Franklin, also known as Franklin Templeton, is the second largest holder of Puerto Rico bonds among mutual funds. OppenheimerFunds (OPY) is the largest.

The Wall Street Journal said that Franklin is not the only one trying to get rid of its Puerto Rico bonds. According to sources, a “swath of mutual funds and hedge funds” have finally given up on the island’s securities, too. For example, Merced Capital and Varde Funds sold their $172 million in Puerto Rico municipal bonds to other bondholders.

Deutsche Bank Agrees to Pay $220M to Resolve Libor Rigging Probe

Published on: October 26, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank AG (DB) has settled with 45 US states and will now pay $220M to resolve allegations that it engaged in rigging the London Interbank Offered (LIBOR) rate and other benchmark interest rates. According to the settlement, the bank admitted that its managers and traders took part in benchmark rigging from ’05 to ’09.

A press release issued by New York Attorney General Eric Schneiderman states that Deutsche Bank “acted unlawfully,” including that:

· The bank defrauded counterparties when it didn’t disclose that it was making LIBOR submissions that were “false or misleading.”

· Its traders tried to influence the LIBOR submissions of other banks so that Deutsche Bank would benefit.

· The bank knew that other banks were rigging LIBOR, too.

· Deutsche Bank didn’t disclose that the other banks’ LIBOR submissions were not accurate reflections of their borrowing rates or that the published rates were not accurate to the submitting banks’ real borrowing costs.

Securities News: Ex- HSBC Executive Found Guilty of Fraud Involving $3.5B Currency Trading & Hedge Fund Sues Barclays For Copper Market Rigging

Published on: October 24, 2017 | by Shepherd Smith Edwards & Kantas, LLP

A federal jury in New York has found Mark Johnson guilty on criminal charges accusing him of front-running involving a $3.5B currency trade. HSBC’s ex-foreign-exchange cash trading global head is the first banker that the US Justice Department charged over forex rate rigging.

Johnson was convicted on eight counts of wire fraud and one count of wire fraud conspiracy, and he reportedly will appeal the verdict. Johnson maintains that he was acting in the best interest of the client involved and he did not do anything wrong or irregular.

According to acting US Attorney in Brooklyn Bridget M. Rohde, Johnson used confidential information given to him by an HSBC client to make trades in an attempt to earn millions of dollars for the bank and himself while costing the client money. He and ex-HSBC European currency trading head Stuart Scott allegedly engaged in front running, which involves making trades based on advanced information about a big market order, with the advanced trades rendering huge profits once the bigger transaction has upped the price. Scott is currently in the UK battling extradition efforts to bring him back to the US.