Investor Lawyers Blog

Cryptocurrency Fraud Allegations Lead to Criminal Allegations Alleging $32M ICO Scheme

Published on: May 22, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In New York, the founders of Centra Tech are now facing securities fraud, wire fraud, and conspiracy charges related to an alleged cryptocurrency fraud. Robert Farkas, Sohrab Sharma, and Raymond Trapani are accused of fraudulently raising $32M from investors during an initial coin offering (ICO).

Prosecutors claim that the men misled investors into thinking that the Centra tokens they had invested in had partnership deals with Visa, Bancorp, and Mastercard. These agreements supposedly involved the issuance of debit cards that would allow them to spend the cryptocurrency at any business that accepted Mastercard or Visa. Farkas, Sharma, and Trapani are accused of lying about a fake CEO and licenses for money transmitters. They also are accused of making misrepresentations and omissions.

Last month, the Federal Bureau of Investigation arrested the company co-founders and confiscated 91,000 Ether units in digital money valued at $60M.

Assured Guaranty Sues Puerto Rico Over Fiscal Rescue Plan

Published on: May 21, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Assured Guaranty has filed a lawsuit against Puerto Rico for the second time. The bond insurance company, which insures about $5 billion of Puerto Rico bonds, wants a federal court to decide that the U.S. territory’s latest fiscal plan to revive it from financial bankruptcy “invalid.”

Also named a defendant in the lawsuit is the fiscal oversight board that was federally appointed to help the island recover from the over $70 billion of debt that it owes. Assured had filed a similar complaint against Puerto Rico prior to Hurricane Maria’s arrival in September, but it withdrew the lawsuit after the storm.

Now, however, the bond insurer is contending that the fiscal plan, which establishes future economic projections for the U.S. territory, was developed without consulting creditors. The plan estimates about $6.05 billion of debt service capacity over six years, which is a sign that creditors should expect significant reductions to their repayments.

Securities Cases: Anti-Money Laundering Violation Allegations Lead to $5.3M Fine Against ICFBCFS, Three Houston-Based Healthcare Executives are Accused of Falsifying Financial Information, and Pension Fund Accuses Wells Fargo of Holding Back Rebate Fees

Published on: May 18, 2018 | by Shepherd Smith Edwards & Kantas, LLP

ICFBCFS and Chardan Capital Markets Accused of Anti-Money Laundering

FINRA has fined the Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) $5.3M for “systemic anti-money laundering compliance failures.” The self-regulatory organization contends that when clearing and settling the liquidation of over 33 billion penny stock shares between 1/2013 and 9/2015, the firm did not have in place an anti-money laundering program that was reasonable enough to identify and report possibly suspect transactions, especially when penny stocks were involved. ICBCFS is settling the case without denying or admitting to the self-regulatory authority’s findings. It has, however, consented to an entry of the findings.

ICBCFS also agreed to pay an $860K penalty to settle a US Securities and Exchange Commission case alleging anti-money laundering violations and the failure to report billions of suspect penny stock sales.

Royal Bank of Scotland Settles Mortgage Fraud Case for $4.9B

Published on: May 17, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Once again, Royal Bank of Scotland (RBS) has arrived at yet another securities settlement related to its mortgage practices leading up to the 2008 housing crisis. This time, RBS is getting ready to pay almost $4.9B. The deal, reached with the US Justice Department, must still must be finalized. The DOJ had been investigating allegations that the British bank sold high risk loans between 2005 and 2007.

CNN reports that since the economic crisis, RBS has paid about $28.4B in fines and settlements, including $500M to the state of New York earlier this year to settle allegations of misrepresentations made and deceptive practices used on investors of residential mortgage-backed securities. The bank settled for $5.5B with US Federal Housing Finance Agency last year to resolve allegations that it bundled and sold more than $30B of risky loans to government-sponsored enterprises Freddie Mac and Fannie Mae.

RBS previously reached two settlements with the National Credit Union Administration. One, for $1.1BM in 2016, was over claims that it sold faulty mortgage-backed securities to credit unions. The other, for $129.6M, settled claims tied to alleged losses for corporate credit unions Southwest and Members United bought RMBSs. According to NCUA, RBS made misrepresentations when underwriting and selling the residential mortgage-backed securities.

Gerova Financial Group Chairman and Others Plead Guilty

Published on: May 16, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Gerova Financial Group Chairman and Two Others Plead Guilty in Scam to Defraud Native American Tribe and Other Investors

Gary Hirst, Jason Galanis, and Hugh Dunkerley have all pleaded guilty to criminal charges related to a scam to defraud a Native American tribal entity and a number of investment advisory clients. Prosecutors contend that the three men took part in a scam to misappropriate bond proceeds from securities issued by the Wakpamni Lake Community Corporation and to use money in asset management firm clients’ accounts to buy the bonds. The clients were then not able to buy or sell the bonds, because the securities were not liquid and did not have a ready secondary market.

Hirst, who pleaded guilty to four fraud counts, now faces up to 35 years in prison and $2.75M in fines. The former chairman of Gerova Financial Group Ltd was sentenced to 6.5 years in prison last year for defrauding shareholders when he secretly awarded himself and others almost $72M of the reinsurer’s stock. Hirst also had to forfeit approximately $19M.

Investor Fraud: Four More People Charged in $34M Biozoom Stock Scam, Alternative Investment Firm Owner is Accused of Misappropriating Nearly $6M, and California Investment Adviser Settles Allegations in $71M Scheme

Published on: May 15, 2018 | by Shepherd Smith Edwards & Kantas, LLP

$34M Illegal Stock Scam Leads to New Charges

The US Securities and Exchange Commission has filed charges in an alleged nearly $34M illegal stock sale involving Biozoom Inc. stock that caused serious financial losses for retail investors. Biozoom was previously called Entertainment Art Inc..

It was in 2013 that the regulator was able to get a court order freezing proceeds made from the allegedly illegal stock sales. The SEC contends that from March to June 2013, ten people received over 20 million Entertainment Art shares. A number of these individuals then sold over 14 million of these shares in a month-long period. This resulted in around $34M in sales.

Texas Regulator’s Probe Uncovers Widespread Cryptocurrency Fraud

Published on: May 14, 2018 | by Shepherd Smith Edwards & Kantas, LLP

According to the Texas State Securities Board’s Enforcement Division, a four-week probe of investment offerings connected to virtual currencies has uncovered “widespread fraud.” The cryptocurrency fraud investigation took a look at investment offerings targeting investors in the state and which appeared to employ fraudulent and illegal solicitation tactics.

Of the 32 investigations conducted beginning on December 18^th of last year:

None of the promoters examined were registered in Texas to sell securities in the state.

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.