Securities Fraud

SEC Charges Immigration Attorneys with Securities Fraud Involving EB-5 Immigration investor Program

Published on: September 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The SEC is charging a Los Angeles-based immigration lawyer, his wife, and his law firm partner with securities fraud that targeted investors who wanted to gain U.S. residency through the EB-5 Immigration investor program. The program lets immigrants apply for U.S. residency if they invest in a project that helps create jobs for workers in this country.

According to the Commission, Justin, his spouse Rebecca Lee, and Thomas Kent raised close to $11.5 million from more than twenty investors that wanted to join the program. They told investors that they would qualify to join if they invested in an ethanol plant that was going to be constructed in Kansas.

The three of them are accused of taking the money and misappropriating it for other uses. Meantime, the plant was never constructed and no jobs were created. Yet Justin, Rebecca, and Thomas allegedly continued to deceive investors so that they kept believing that the construction project was in the works.

Securities Lawsuit Accuses Deutsche Bank, JPMorgan Chase, Credit Suisse, and Other Banks of Manipulating ISDAfix

Published on: September 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Alaska Electrical Pension Fund is suing several banks for allegedly conspiring to manipulate ISDAfix, which is the benchmark for establishing the rates for interest rate derivatives and other financial instruments in the $710 trillion derivatives market. The pension fund contends that the banks worked together to set the benchmark at artificial levels so that they could manipulate investor payments in the derivative. The Alaska fund says that this impacted financial instruments valued at trillions of dollars.

The defendants are:

• Bank of America Corp. (BAC)

FINRA Investor Alert Warns About Scams Touting Ebola Cure and Other Viral Disease Stock Schemes

Published on: August 19, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has put out an investor alert warning against buying stocks in companies claiming to combat viral diseases. The self-regulatory organization says it knows of several possible schemes involving stock promotions employing tactics such as pump-and-dump scams to inflate share prices. The scammers will then sell their shares at a profit while leaving investors with shares that have lost their value.

Intensified news coverage of the recent Ebola and Middle East Respiratory Syndrome outbreak will likely have attracted the attention of stock scammers wanting to take advantage of people’s fears. To avoid falling victim to a viral disease stock scam, FINRA is offering several tips, including:

• Be wary of promotional materials, correspondence, and press releases from senders you don’t know. Watch out for communications that say little about the risks involved while only touting the positives. Getting a barrage of information about the same stock opportunities can also be a red flag.

Securities Lawsuit Against BlackRock Accuses Firm of Charging Excessive Sub-Advisor Fees

Published on: August 19, 2014 | by Shepherd Smith Edwards & Kantas, LLP

BlackRock Inc. (BLK) wants a judge to dismiss a securities lawsuit accusing the money manager of charging exorbitant fees and breaching its fiduciary duties. Lawyers for the firm argued that the claims have no merit in the U.S. District Court in Trenton, New Jersey.

The investor plaintiffs, including a Florida investment adviser who won the lottery, contend that BlackRock’s subsidiaries collected excessive fees for services provided to Equity Dividend Fund (MDDVX), worth almost $30 billion, and their Global Allocation Fund, (MDLOX), worth close to $59 billion. They say that they lost millions of dollars because of excessive fees.

However, reports InvestmentNews, according to one of the lawyers representing BlackRock, the complaint does not properly acknowledge the fund’s size or allege facts adequate enough to plausibly demonstrate that the fees are unreasonable, especially considering the services that were provided.

Former MIT Professor and His Son Plead Guilty to $140M Hedge Fund Fraud

Published on: August 14, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Gabriel Bitran, an ex- Massachusetts Institute of Technology professor, and his son Marco Bitran have pled guilty to securities fraud charges accusing them of bilking investors of $140 million. Through their company, GMP Capital Management, the father and son placed investor money in hedge funds linked to Bernard Madoff, who ran the Ponzi scam that defrauded clients of billions of dollars.

According to prosecutors, from 2005 to 2011 Bitran and Marco collected $500 million from investors by promising to invest their funds using an original complex mathematical trading model. The money was supposed to go into exchange-traded funds and other securities but were instead placed in hedge funds.

When the financial crisis of 2008 happened, a number of the hedge funds got into trouble. Some of their investors lost up to 75% of their principal.

SEC Tells J.S. Oliver Capital to Pay $15M for Alleged Cherry-Picking Scam

Published on: August 11, 2014 | by Shepherd Smith Edwards & Kantas, LLP

SEC Chief Administrative law judge Brenda Murray has fined J.S. Oliver Capital Management $15 million for securities violations and breach of fiduciary duty related to an alleged cherry-picking scam that bilked clients of approximately $10.9 million. The registered investment adviser must also pay $1.4 million in disgorgement.

According to the regulator, the RIA awarded profitable trades to hedge funds associated with the firm, while other clients, including a charitable foundation and a widow, were given the less profitable trades that resulted in major losses. These hedge funds that benefited were those in which J.S. Oliver founder Ian Oliver Mausner was an investor. Mausner is also accused of using soft-dollar commissions inappropriately.

Mausner continues to deny the SEC charges. He claims that the profitable trades were disproportionately allocated because of market volatility and that clients’ investment goals played a part.

SEC Gets Nearly $70M Judgment Against Richmond, VA Firms, CEO Find Liable for Securities Fraud

Published on: August 5, 2014 | by Shepherd Smith Edwards & Kantas, LLP

AIC Inc., Community Bankers Securities LLC, and CEO Nicholas D. Skaltsounis must pay a nearly $70 million judgment for securities fraud, in the wake of an earlier trial that found them liable. The Securities and Exchange Commission had accused them of conducting an offering fraud while selling millions of dollars in AIC promissory notes and stocks to investors in different states, including unsophisticated investors and elderly customers.

The regulator accused them of omissions and misrepresentations of material information about the investments, their risks, the return rates, and how the money would be used by AIC, which is a financial services holding company, and Community Bankers Securities, its subsidiary brokerage firm. The SEC argued that the companies were not profitable and new investors’ money was used in Ponzi scam fashion to repay returns and principal to earlier investors.

Last year, a jury ruled in the SEC’s favor against AIC, Community Bankers Securities and Skaltsounis. Now, AIC must disgorge over $6.6 million, over $969,00 in prejudgment interest, and a $27.95 million penalty. Community Bankers Securities disgorgement is $2.8 million, over $400,000 in prejudgment interest, and a $27.95 million penalty. Skaltsounis is to pay over $2.5 million dollars in total.

Broker Fraud: Ex-Investors Capital Rep. is Indicted in Ponzi Scheme, Credit Suisse Sues Two Ex-Brokers Over Client Data Theft, and SEC Files More Insider Trading in IBM-SPSS Acquisition

Published on: July 1, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Investors Capital Rep. Charged in $2.5M Ponzi Scam

Patricia S. Miller, a former Investors Capital Corp. representative, has been indicted on charges that she ran a $2.5 million investment fraud. She is accused of promising clients high yields for placing funds in “investment clubs.” Miller allegedly took this money and either gambled it away or used it to pay for her own spending.

According to prosecutors in Massachusetts, alleged fraud took place from 2002 through May 2014. Investors Capital fired Miller last month. Her BrokerCheck Report notes that the independent broker-dealer let her go because she allegedly misappropriated funds, borrowed client money, generated false documents, and engaged in “fraudulent investment activity.” Miller is charged with five counts of wire fraud.

SEC Charges Chicago Investment Advisory Founder With Real Estate Investment Fraud

Published on: June 11, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Securities and Exchange Commission is charging Attorney Robert C. Acri with Illinois securities fraud related to a real estate venture. Acri is the founder of Kenilworth Asset Management, LLC, a Chicago-based investment advisory firm. He has agreed to settle by disgorging the funds that were misappropriated from investors, as well as commissions, interest, and a penalty. Monetary sanctions total about $115,000.

The SEC brought the real estate investment fraud charges after detecting possible misconduct when it examined the firm. The regulator’s Enforcement Division was alerted and a probe followed.

According to the findings of the investigation, Acri misled investors over promissory notes that were issued to supposedly redevelop an Indiana shopping center, misappropriated $41,250 for other purposes, and failed to tell investors that the firm received a 5% on every note sale. This amount would total $13,750. He also purportedly did not let investors know a number of material facts, including that the reason there even was an investment offer is that he was trying to rescue funds that other clients had invested earlier in the same real estate developer.

SEC Judge Bans Money Manager For Misleading Morningstar and the Public

Published on: May 27, 2014 | by Shepherd Smith Edwards & Kantas, LLP

U.S. Securities and Exchange Commission judge Cameron Elliot has banned Max E. Zavanelli, a separate-account money manager from the securities industry. Now, Zavanelli and his firm, ZPR Investment Management Inc., must pay $660,000 for misleading research firm Morningstar Inc. and the public.

ZPR Investment Management, in its filing with securities regulators, names over $200 million in assets from 119 accounts. Its clients include pension plans, high net worth individuals, and charitable organizations.

According to Judge Elliot, Zavanelli misrepresented and left out important information in newspaper ads, newsletters, and reports to Morningstar. Firm performance data is believed to have falsely implied compliance with the Global Investment Performance Standards. These are the standardized, voluntary ethical principals for investment advisers that call for fair representation and full disclosure. It also includes guidance for advertisements that maintain they are in compliance with GIPS.