Securities Fraud

CFTC Orders Convergent Wealth Advisors Ordered to Pay $800K Securities Fraud Fine

Published on: December 23, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Commodity Futures Trading Commission says that Convergent Wealth Advisors must pay a civil penalty of $800K related to a commodity pool run by its former CEO David Zier. Zier committed suicide in 2014. That was also the year that a regulatory probe was begun around the private fund ZAM LLC that Zier operated.

Convergent compliance personnel staff were the ones who noticed that there were inconsistencies in some ZAM performance reports and account statements. In its securities case, the CFTC said that from 12/2010 and until Zier’s passing, there were $2.9M in fraudulent solicitations involving the private fund.

According to the CFTC, Zier put out false statements and made fraudulent representations to clients about the pool, which he ran as an outside business activity while working as an agent for the registered investment adviser. Zier purportedly represented ZAM as profitable even though it had sustained significant losses. He also allegedly made up performance data, which he gave to investors, to hide the losses.

SEC Files Charges Against Operators of Bogus Day Trading Firm that Bilked Inexperienced Investors Globally of Over $1.4M

Published on: December 21, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed securities fraud charges against Naris Chamroonrat of Thailand and American Adam L Plumer. The regulator contends that the two men ran a fake day-trading that collectively defrauded hundreds of investors in over 30 nations of over $1.4M. At least 180 of the investors are from the US, including several from New Jersey.

Chamroonrat purportedly recruited Plumer to bring in investors to engage in day trading via Nonko Trading, an unregistered broker-dealer. The firm promised low trading commissions, good leverage, and low deposit requirement minimums.

However, contends the regulator, rather than employing a live securities trading platform, the firm gave certain investors training accounts that simulated the execution and placement of their orders that were never actually sent to the markets. Instead, their money went toward Chamroonrat’s own expenses, payments to Plumer and others, and was used as Ponzi-like payments to investors who decided close their accounts. The Commission believes that the day trading scam purposely targeted novice investors who were more apt to make trades that were not profitable, less likely to attempt to take money out of their account, and more prone to assuming that their investment losses were from trading and not because of fraud.

Securities Fraud: Former California Financial Adviser Who Worked For Texas Brokerage Firm is Barred After Bilking Professional Athletes of $2M, FINRA Fines Allstate Financial Services $1M for Inadequate Supervision, and Former Registered Investment Adviser Settles Cherry Picking Scam for $328K

Published on: December 20, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Financial Adviser Who Worked for Texas-Based Firm is Barred by SEC After Defrauding Pro Athletes
Ash Narayan, an ex-California financial adviser, has been barred by the US Securities and Exchange Commission. Narayan, who is accused of secretly receiving almost $2M from companies that he invested in on behalf of his professional athlete clients, agreed to no longer associate with advisory or brokerage firms to resolve the regulator’s allegations.

Narayan worked for Dallas firm RGT Wealth Advisors, but he was based in California as the managing director of its Irvine office. He also is accused of misrepresenting himself as a CPA and placing clients in unsuitable private investments. In October, the Certified Financial Planner Board of Standards issued a temporary suspension against him while an investigation was conducted into the allegations. RGT Wealth Advisers fired Narayan early this year.

According to the SEC, Narayan’s alleged fraud occurred between 2010 and 2016, during which time he directed $33M to a company that he was involved in and was in poor financial health. By settling, Narayan is not denying or admitting to the SEC charges.

FINRA Bars Ex-JP Turner Broker For Elder Financial Fraud

Published on: December 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred ex-JP Turner & Co. broker Anthony Mastroianni Jr. for allegedly churning an account belonging to an older customer. Mastroianni has not denied or admitted to the regulator’s findings and he did not appear in front of FINRA to provide testimony in this case.

According to the regulator, from ’11 to ’13, Mastroianni took part in churning or excessive trading in the account of this customer, which was maintained at JP Turner and later at Alexander Capital when the broker was affiliated with the brokerage firms. He also allegedly borrowed $90K from the same customer and made another four transactions without letting either JP Turner or Alexander Capital know and/or getting their approval.

Mastroianni’s BrokerCheck reports notes that there are seven disclosure events in which he has been named, including two customer disputes that are still pending.

Criminal Securities Fraud: Former Train Babcock Financial Adviser Pleads Guilty In $1.6M Family Trust Theft, Prosecutors Go After Former Cantor Fitzgerald Trader for RMBS Fraud, & Two NJ Traders Are Charged in $26M Stock Rigging Case

Published on: December 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Financial Advisor Admits to Stealing $1.6M From Family’s Trusts
Brian Keenan, an ex-financial advisor, has pleaded guilty to criminal charges accusing him to stealing over $1.6M from three trusts belonging to members of the same family. Keenan had been employed with Train Babcock Advisors from about 5/2007 to 8/2012. It was during this time that the former financial adviser stole over $1.6M from the beneficiaries of three trusts.

Not only did Keenan take their money, but he also spent the funds on his own expenses. He set up a joint checking account under his name and the name of one of the beneficiaries, and he issued over 40 checks from the trust accounts to the joint account. The beneficiary under whose name he co-opened the account did not have access to it.

Issuing a statement about the financial fraud case, Manhattan District Attorney Cyrus R. Vance reminded the public that a financial adviser’s main duty is to act in a client’s best interest. Vance said that rather than fulfilling that obligation, Keenan took advantage of his clients. Keenan pleaded guilty to Grand Larceny in the First Degree.

SEC Charges Onix Capital and Its Owner With $5.7M Promissory Note Fraud

Published on: November 30, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission has filed promissory note fraud charges against Onix Capital and it owner Albert Chang-Rajii. The Miami-based asset management company and Chang are accused of bilking investors who put their money into promissory notes and start-ups, as well as of falsely portraying the Chilean national as an award-winning multi-millionaire “angel” investor who had graduated from Stanford University’a business school.

According to the regulator’s complaint, Chang and Onix Capital sold over $5.7M in promissory notes that they falsely claimed he had guaranteed and told investors that the notes themselves “guaranteed” yearly returns of 12-19%. They also raised over $1.7M that Chang was supposed to invest in companies like Square, Snapchat and Uber.

The SEC said that, in truth, Onix Capital’s investment revenue was “non-existent” and Chang did not have the professional or educational background that he touted. The Commission alleges that rather than use the funds as promised, the money went to Chang and to pay other investors.

Securities Cases: Minnesota Adviser Goes to Prison Over Ponzi Scam, Ex-Morgan Stanley Broker Accused of soliciting $2.7 M from Elderly Investors After He is Barred from the Securities Industry, and 808 Renewable Energy Faces Fraud Charges

Published on: November 25, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Minnesota-Based Investment Adviser Gets Six-Year Jail Term
According to the Minnesota Department of Commerce, Levi David Lindemann was ordered to serve a 74-month prison sentence—that’s six years—for bilking clients in a Ponzi scam. Lindemann owned Gershwin Financial, which did business using the name Alternative Wealth Solutions. He pleaded guilty to money laundering and federal mail fraud charges.

Minnesota Commerce Commissioner Mike Rothman said that Lindemann abused his position as a financial adviser when he defrauded clients, including older investors. He did this by promising to invest their funds in safe investments but instead used their money to make Ponzi-type payments to clients and pay for his own expenses.

Lindemann’s guilty plea states that he solicited money from about 50 investors. He attempted to hide the securities fraud by generating fake secured notes as supposed evidence of the clients’ investments. The SEC permanently barred him from the securities industry earlier this year.

SEC Accuses Barred Broker of Selling Securities to Older Investors
According to the SEC, ex-Morgan Stanley (MS) broker Rafael Calleja solicited $2.7M from 10 retiree and elderly investors after he had already been barred from the securities industry. The regulator claims that Calleja told investors their principal was insured and they would get a fixed return rate in a year. Meantime, he allegedly used at least $12K of their funds to pay for cruises, golf outings, and other personal expenses. He also purportedly failed to tell investors that his broker license had been revoked.

Securities Fraud Cases: VFG Securities Settles With FINRA Over Nontraded REIT Sales, Massachusetts Seeks To Ban Trader and His Software Company, and Utah Man Who Bilked Over 5,700 in $25M Fraud Gets Prison Sentence

Published on: November 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Broker-Dealer Owner and His Firm Settle SEC Case Alleging Overconcentration of Investor Money In Illiquid Investments

Jason Vanclef and his brokerage firm VFG Securities Inc. have settled the Financial Industry Regulatory Authority’s case accusing them of not adequately supervising their brokers so that clients’ portfolios did not end up concentrated in illiquid investments. Vanclef and VFG Securities, however, are not denying or admitting to the claims made in the complaint.

According to FINRA, from 11/2010 to 6/2012, nearly 95% of the broker-dealer’s revenue came from direct participation programs (DPP) and nontraded real estate investment trusts (nontraded REIT) sales. The illiquid investments were sold retail customers.

FINRA claimed that Vanclef had used “The Wealth Code,” which was the book that he authored, as a sales tool to promote investing in DPPs and nontraded REITs and to attract potential investors. The settlement with the regulator notes that in the book Vanclef repeatedly touted both types of illiquid investments as offering capital preservation and better returns—claims that FINRA said are “inaccurate and misleading” and conflict with information that the firm offered in prospectuses for the nontraded REITs and DPPs.

FINRA Orders Oppenheimer to Pay $3.4M Penalty For Alleged Reporting Failures and Not Giving Discounts to Mutual Fund Clients

Published on: November 21, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority says that Oppenheimer & Co. (OPY) must pay $3.4M in sanctions. According to the regulator, for eight years the firm was about four years late when submitting 365 filings about disciplinary actions that it brought against its brokers and in arbitration and litigation settlements. FINRA is also accusing Oppenheimer of not giving seven claimants the documentation they needed in their arbitration against Mark Hotton, an ex-registered representative, and of overcharging 825 customers more than $1M collectively for mutual fund shares over a six-year period.

The self-regulatory organization claims that the late filings to FINRA took place between 2008 and 2016 and that Oppenheimer failed to provide claimants the documentation related to the Mark Hotton allegations between 2010 and 2013. The failure to apply the appropriate fee waiver discount for mutual fund shares purportedly occurred between 2009 and 2015.

Already, Oppenheimer has paid over $6M to settle customer disputes alleging inadequate supervision of Hotton and another $1.25M to 22 customers who did not file arbitration cases but suffered losses, too. Oppenheimer also was ordered to pay a $2.5M fine to FINRA last year over the Hotton claims. The former broker, whom FINRA permanently barred from the securities industry three years ago, was sentenced sentenced to 11 years in prison for stealing client monies and excessively trading their brokerage accounts.

Broker Fraud Cases: Former Newbridge Securities Broker Pleads Guilty in $131 Market Manipulation Scheme and FINRA Bars LPL Financial Broker for Depositing Client Funds Into His Own Account, and Lincoln Financial Securities is Fined $650K for Not Protecting Client Information

Published on: November 17, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Newbridge Securities Broker Involved in $131M Fraud Pleads Guilty
Gerald Cocuzzo, has pleaded guilty to securities fraud related to his involvement in a $131M market manipulation scam involving Forcefield Energy Inc. (FNRG). According to the U.S. Justice Department, between 1/2009 and 4/2015, Cocuzzo and others sought to bilk investors in the publicly traded company that globally distributes and provides LED lighting products. They did this by artificially manipulating the volume and price of the shares that were traded.

Meantime, Cocuzzo received kickbacks for buying Forcefield stock in his clients’ brokerage accounts. He did not tell the customers that he was receiving these payments. Instead, he and several others sought to hide their involvement.

Newbridge Securities fired Cocuzzo earlier this year following the federal indictment. Before working at Newbridge, he was registered with IAA Financial, previously called CBG Financial Group Inc.