Investor Lawyers Blog

Judge Rules Against Ex-UBS Puerto Rico Broker in Closed-End Fund Case

Published on: May 6, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In the U.S. Securities and Exchange Commission’s (SEC) Puerto Rico bond fraud case against ex-UBS Puerto Rico broker Jose Ramirez, a federal judge has found that Ramirez committed fraud and was in violation of securities laws when he directed customers to use lines of credit to purchase Puerto Rico closed-end funds. In 2015, the SEC had filed charges against Ramirez accusing him of misleading customers regarding the Puerto Rico closed-end funds while advising them to use money from UBS Bank USA credit lines to buy UBS Puerto Rico fund shares. Ramirez allegedly made an additional $2.8 million in commissions as a result. The brokerage firm fired Mr. Ramirez in 2014.

According to U.S. District Court Judge Pedro Delgado-Hernandez, who granted the SEC’s motion for summary judgment, the ex-UBS Puerto Rick broker lied to customers and failed to tell them that if their collateral went down in value and reached a certain point, the customers might need to have their accounts liquidated to pay back the loans.

In 2013, following a number of credit downgrades, the Puerto Rico closed-end funds saw a substantial drop in value. By September 2013, more than three dozen of Ramirez’s customers had $37 million in “margin maintenance calls” that required many clients to have their accounts liquidated.

Recent Criminal Securities Fraud Cases: Ex-OmniView Capital Advisers CEO is Convicted in $300M Fraud, Jury Finds Former-Wilmington Trust Executives Guilty, and Jury Finds Two Hedge Fund Professionals and a Health Consultant Guilty in Insider Case

Published on: May 5, 2018 | by Shepherd Smith Edwards & Kantas, LLP

$300M Stock Scam Allegations Lead to Guilty Verdict

A Brooklyn jury has convicted ex-OmniView Capital Advisors LLC CEO Abraxas J. Discala of conspiracy, wire fraud, and securities fraud in a $300M market rigging scam/ pump-and dump fraud. A second defendant, lawyer Kyleen Cane, was acquitted after initially being charged with conspiracy and securities fraud.

According to prosecutors, the stock fraud occurred from 10/2012 through 7/2014. Trades in four publicly traded companies were reportedly involved.

LPL Financial Agrees to Pay $26M Over Unregistered Securities to State Securities Regulators

Published on: May 4, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In an agreement reached with the North American State Securities Administrators Association, LPL Financial (LPLA) will pay $26M in fines to a number of US states and jurisdictions over unregistered securities sales going back more than a decade. NASAA reports that the settlement comes after a task force was set up last summer to probe LPL’s sales of unregistered, non-exempt securities to clients. Now, LPL will pay $499K to each state securities regulator. It also must buy back certain securities that it sold to investors going as far back as October 2006.

Details of the LPL Settlement for the Sale of Unregistered Securities

Per the settlement, LPL will offer to repurchase securities in the brokerage firm’s accounts that were found to have been unregistered, fixed-income or non-exempt equity securities. Every buyback offer will come with 3% simple interest annually. Requirements were also put in place for investors with “affected securities” that were moved or sold from an LPL account.

Massachusetts Hedge Fund Manager Sentenced to Prison for Investor Fraud

Published on: May 3, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Yasuna Murakami, a hedge fund manager who oversaw MC2 Capital Management LLC And MC2 Canada Capital Management LLC, is sentenced to six years in prison for fraud. Prosecutors accused him of defrauding hedge fund investors. Additionally, Murakami, must pay over $10.5M in investor restitution.

Police arrested the Massachusetts hedge fund manager last year. When pleading guilty to wire fraud, Murakami acknowledged that he diverted millions of dollars in investor monies to his own personal and business accounts, as well as used their funds to pay for a luxury sports car, make credit card payments, travel abroad, make purchases at expensive department stores, initiate investments on his own behalf, and issue Ponzi-like payments to investors.

Yasuna Murakami and Former Business Partner Were Working Together to Defraud Investors

Ex-UBS Official Recounts How the Bank Got Investors to Take on More Puerto Rico Debt

Published on: May 2, 2018 | by Shepherd Smith Edwards & Kantas, LLP

A former UBS (UBS) banking official is claiming that Wall Street banks like his previous employer played a key role in the Puerto Rico economic crisis that has left the U.S. territory more than $70 billion in debt and mired in bankruptcy-like proceedings. The ex-UBS official, Carlos Capacete, was interviewed as part of a joint NPR and FRONTLINE probe. Capacete worked for UBS Puerto Rico (UBS-PR) for over a quarter of a century and was the head of the biggest UBS branch on the island in Hato Rey. At one point, Capacete oversaw $3 billion in client assets. Capacete left UBS in 2014 shortly after the crash in Puerto Rico bonds.

Prior to the market crash, Puerto Rico bonds and closed-end bond funds were highly profitable sales products for UBS and other banks on the island. While trying to prevent a government shutdown a number of years back, the U.S. territory started to borrow to pay for yearly government costs. This added $48 billion of debt in 14 years, reports PBS and FRONTLINE.

The Puerto Rico Debt Crisis Only Increased as Banks Made More Money

$85M Ponzi Scam Allegedly Defrauded at Least 150 Investors

Published on: May 1, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed fraud charges in an alleged $85M Ponzi scam that may have defrauded at least 150 investors. The defendants in the civil case are Arthur Lamar Adams and his Madison Timber Properties, LLC. Prosecutors have brought a parallel criminal case against Adams charging him with two counts of wire fraud. They contend that Adams’ fraud ran from 2011 through last month and his Ponzi scam involved fraudulently securing over $100M from over 250 investors in at least 14 states.

Adams Allegedly Provided False Information to Investors in the Ponzi scam involving his business Madison Timber Properties.

According to the regulator’s complaint, Adams lied when he told investors that their funds would go toward obtaining and harvesting timber from different land owners. He also promised 12-15% yearly returns. In truth, contends the SEC, Adam’s company did not have harvesting rights and Adams allegedly forged documents, deeds, and cutting agreements. The regulator is accusing Adams and Madison Timber Properties of violating the federal securities laws’ antifraud provisions, making untrue statements and omissions, and committing fraud through their business actions. A court has approved the regulator’s request for an asset freeze

Panasonic Settles Accounting Fraud and FCPA Violation Charges For $280m

Published on: April 30, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Panasonic Fined by United States in Bribery Scheme

Panasonic Corp. will pay over $143M in disgorgement plus prejudgment interest to resolve a US Securities and Exchange Commission case involving a bribery scheme, accusing the company of accounting fraud violations and violating the Foreign Corrupt Practices Act (FCPA). Panasonic consented to the order, which finds that the Japan-based corporation violated the Securities Exchange Act of 1934. In a parallel criminal, the company will pay a $137M penalty in a deferred prosecution deal reached with the US Justice Department, which accused Panasonic of violating the FCPA over books and records.

The SEC contends that Panasonics Avionics Corp. a Panasonic subsidiary that offers in-flight entertainment and communications systems, offered a government official a consulting position at a state-owned airline to incentivize that individual into assisting the avionics company in garnering business. During the time of the scam, said the SEC’s order, the avionics company was negotiating two deals valued at over $700K with the airline.

JB FINANCIAL RESOURCES ORDERED TO PAY $750K OVER $1.2B WOODBRIDGE PONZI SCAM

Published on: April 28, 2018 | by Shepherd Smith Edwards & Kantas, LLP

According to New Jersey’s Attorney General’s Office and Division of Consumer Affairs, JB Financial Resources and its owner Jeffrey Mitchell Isaacs must pay a $750K for allegedly selling NJ investors over $7M in unregistered securities connected to the $1.2B Woodbridge Ponzi Scam. More than 8,500 people are said to have been defrauded nationally in that scheme before its demise last year.

The state of New Jersey contends that JB Financial Resources and Isaacs sold about 88 unregistered securities on behalf of the Woodbridge Group of Companies. Isaac’s other entity, JMI Associates LLC, is also accused of promoting and selling unregistered investments, including first position commercial mortgage securities (FPCMs) tied to Woodbridge in NJ.

Marketing collateral touted the unregistered securities as a “unique lending opportunity.” Sale proceeds would reportedly be used by the Woodbridge Funds to issue commercial loans to commercial borrowers. Instead, the FPCMs sold to NJ investors were not collateralized right away. In certain instances, borrowers did not get the loans for weeks or months after investors bought them.

SECURITIES CASES: YAHOO AGREES TO PAY $35M TO SETTLE CHARGES AND A BIOTECH START UP IS ACCUSED OF ISSUING MISLEADING INFORMATION

Published on: April 26, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Altaba is Fined $35M For Not Disclosing World’s Largest Data Breach

Altaba, formerly Yahoo! Inc., will pay a $35M penalty in a data breach settlement to resolve US Securities and Exchange Commission charges accusing the entity of misleading investors because it did not disclose a major cyber-security data breach. Despite settling, Yahoo is not denying or admitting to the findings.

The data breach, one of the largest in the world to date, involved Russian hackers stealing personal information involving hundreds of millions of user accounts in 2014. The information that was taken included usernames, birth dates, email addresses, passwords that were encrypted, phone numbers, and both security questions and answers. Yahoo’s information security team found out about the breach soon after it happened.

$22M HEDGE FUND FRAUD LEADS TO SEC BAN FOR MONEY MANAGER

Published on: April 25, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Michael Scronic Pleads Guilty in Ponzi Scheme

Michael Scronic, who touted himself as the hedge fund manager of the unregistered Scronic Macro Fund, has agreed to a US Securities and Exchange Commission ban permanently blocking him from buying or selling securities. In a parallel criminal case, Scronic pleaded guilty to securities fraud that involved 45 victims in his over $22M hedge fund fraud. His victims who suffered significant investment fraud losses included acquaintances, relatives, and friends. According to Bloomberg, investors gave him amounts ranging from $23K to $2.4M to invest.

Prosecutors contend that Scronic lied about his investment fund’s performance, touting returns of up to 13% when, in reality, the fund suffered millions of dollars in losses. About $500K, also from investors, was used to fund his own expenses, including a $12K/month New York rental, mortgage payments on a Vermont vacation home, country club and beach club membership fees, and about $15K/month in credit card expenses. The investment scam went on from 2012 through June 2017.