Investor Lawyers Blog

Securities Fraud Cases: Businessman Accused in Jay Peak Resort-Related Investment Scheme Must Pay Back Over $81M in Investor Money, Former State Street VP Faces Another Criminal Charge, and Lawyer Pleads Guilty in $20M Stock Scam

Published on: February 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Businessman Settles SEC Case Over Immigrant Visa-Related Investor Scam

Ariel Quiros, a businessman accused of defrauding foreign investors seeking to earn US residency through the EB-5 Immigrant Investor Program, has agreed to the settle the Securities and Exchange Commission’s case against him. As part of the settlement, which a court still has to approve, Quiros will be held liable for over $81M in disgorgement of ill-gotten gains and a $1M penalty. He also has to forfeit about $417K.

Over 700 investors from at least 75 nations invested with Quiros. Their funds were supposed to go toward “construction projects at the Jay Peak Resort and a proposed (nearby) biomedical research facility,” said the SEC. Instead, contends the regulator, Quiros misused over $50M to buy another ski resort and pay for his own spending, including the purchase of two luxury condos. He also failed to direct about $30M to the construction projects, which was necessary for these investors to become US residents.

Now, Quiros must give up the two condos and the resort that he bought using investors’ funds, as well as surrender his ownership stake in Jay Peak and many other properties.

Deutsche Bank Securities Must Pay $70M for Trying to Rig the ISDAFIX Benchmark

Published on: February 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In a settlement reached with the CFTC, Deutsche Bank Securities (DBSI) will pay a $70M civil penalty to resolve allegations that it attempted to rig the ISDAFIX benchmark. The regulator contends that from 1/2007 through 5/2012, the firm had a number of its traders try to rig the USD ISDAFIX, which is the benchmark used globally for interest rate products.

According to the CFTC’s order, Deutsche bank Securities would make bids, offers, and execute transactions in certain interest rate products such as US Treasuries and swap spreads at the 11am fixing time– or, if not, then close to that hour– to impact the rates seen on the electronic interest rate swap screen. They purportedly did this to lower or raise the reference rates of the swaps broker and influence the USD ISDAFIX when it was published.

Recordings of phone conversations and electronic communications show firm traders talking about taking actions in order to benefit their employer. Also, some Deutsche Bank Securities employees are accused of turning in misleading or fake submissions, again in an attempt to influence the final USD ISDAFIX rates that were published. The CFTC said that such actions were more about the traders’ attempts to manipulate USD ISDAFIX to their benefit rather than an honest assessment of the actual costs associated with going into a certain interest rate swap.

SEC Stops Alleged $5.3M Hedge Fund Fraud Involving Willow Creek Advisors

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

The US Securities and Exchange Commission has filed securities fraud charges against Nicholas Joseph Genovese. The regulator contends that the purported hedge fund manager and his Willow Creek Advisors LLC misappropriated at least six investors’ money to pay for securities trading in his own brokerage account. Now, the SEC wants a temporary restraining order to freeze assets and stop further alleged violations.

According to the Commission’s complaint, Genovese misrepresented his previous experience in the securities industry and as a money manager, as well as the size of his business, including, that he:

· Oversaw $4B of the assets belonging to the Genovese Drug Store family.

· Ran Willow Creek Investments LP with $30B-$39B of assets under management when that figure was closer to less than $10M.

· Falsely stated that he and Willow Creek Advisors employed up to 60 people when the reality was closer to under 10.

· Claimed that his hedge fund made 30-40% investment gains annually when losses where what were actually incurred.

· Hid is criminal history, including, according to news sources, past convictions for forgery and grand larceny.

· Did not tell investors he previously filed for bankruptcy.

· Touted an education and professional history that he’d fabricated, including that he was a former Goldman Sachs (GS) partner and an ex-Bear Stearns portfolio manager, as well as had earned an MBA from Dartmouth.

Two Former Morgan Stanley Investment Advisers Accused of Fraud Plead Guilty

Published on: January 31, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In the criminal case brought against them, two ex-Morgan Stanley (MS) investment advisers, James S. Polese and Cornelius Peterson, have pleaded guilty to the criminal charges against them. Polese was charged with conspiracy, aggravated identity theft, investment adviser fraud, and multiple counts of bank fraud. Peterson is charged with conspiracy, investment adviser fraud, and bank fraud.

In a parallel civil case, the US Securities and Exchange Commission claims that beginning in 2014, the two men defrauded three clients of almost half a million dollars. The allegations include:

*Stealing almost $450K from one client and using the funds to make their own investments and pay for Polese’s credit card bills and the college tuition of his children.
*Using a client’s assets to obtain loan financing for an entity in which they were investors.
*Investing client monies in a venture in which they both had a financial stake without telling the client.
*Getting a loan with unfavorable terms for a client.
*Charging one client advisory fees that were 50% more than what he told her they would be.

BNP Paribas to Pay $90M After Pleading Guilty in FX Currency Rigging Probe

Published on: January 31, 2018 | by Shepherd Smith Edwards & Kantas, LLP

BNP Paribas USA (BNP), A BNP Paribas unit, will pay $90M to settle a criminal case alleging foreign currency price manipulation. It also pleaded guilty by admitting that it conspired to fix prices for Eastern European, Central European, African, and Middle Eastern (CEEMEA)currencies between 9/2011 and 7/2013.

According to the US Justice Department, the BNP Paribas unit engaged in rigging prices through fake trades, orchestrated trades, and by quoting specific prices to certain customers, all on an electronic trading platform. The settlement also settles investigations conducted by the New York State Department of Financial Services and the US Federal Reserve.

In a statement, BNP Paribas USA said that it regretted “the past misconduct” that resulted in this case. The unit will now cooperate with the US government’s ongoing investigation into currency rigging involving the FX market. The bank joins Barclays Plc (BARC), JPMorgan Chase & Co. (JP), Citigroup (C), UBS Group AG (UBS), and Royal Bank of Scotland Group Plc (RBS) in pleading guilty to currency rigging in US probes. Together, the six banks have agreed to pay over $2.8B in fines.

Texas Securities Cases: Ex-LPL Financial Adviser is Suspended for Charging Unreasonable Fees and Commissions, State Regulator Enters Cease and Desist Order Against R2B Coin, and Former Pharr Bank Worker Pleads Guilty to $1M Theft Involving Elderly Customers

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

Beaumont, TX Investment Adviser is Suspended for 90 Days
In a Disciplinary Order, the Texas State Securities Board suspended former LPL Financial LLC (LPLA) investment adviser Jason N. Anderson for 90 days. The state contends that while registered with that firm, Anderson touted an active-trading program to clients that charged them unreasonable fees, which included commissions to Anderson, as well as trading costs.

For example, one client paid costs that were approximately 30% of “the value of the average equity securities” in the client’s account. The Texas regulator said that the trading program would have had to make “extraordinary returns” for investors to “offset” such fees or even, in some cases, allow them to merely “break-even.”

The order called the commissions and trading costs “inequitable practices” that violated the Texas Securities Act. The state accused Anderson of not having reasonable grounds for believing that the trading program would be appropriate for these clients.

Deutsche Bank, UBS, and HSBC Securities Settle Respective Spoofing Cases with the CFTC for $46.6M

Published on: January 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank Securities Inc. and Deutsche Bank AG (DB) will pay a $30M civil penalty to resolve charges brought by the Commodity Futures Trading Commission accusing them of spoofing. According to the regulator, from at least 2/2008 through 9/2014, DB AG, with the help of a number of precious metal traders, sought to rig the price of precious metals futures contracts that were traded on the Commodity Exchange, Inc.

The CFTC’s order said that the traders worked alone and with each other to buy or sell these contracts while planning all along to cancel them before they were executed after a smaller offer was made on the opposite side of the market. The spoof orders were purportedly made to give the impression of market depth in order to generate trading interest.

The regulator found that through the traders’ actions, Deutsche Bank AG sought to not only rig the price of precious metals futures contracts but also to profit from these manipulations. The CFTC said the firm worked with one trader in Singapore who made orders and trades to “trigger customer stop-loss orders.”

AriseBank in Dallas is Accused of Alleged $600M ICO Offering Fraud

Published on: January 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The SEC has put a stop to Dallas-based AriseBank’s initial coin offering. The regulator contends that AriseBank, which touts itself as the first “decentralized bank” in the world, and its principals are committing Texas financial fraud, and they’ve targeted retail investors, including Texas investors, in an effort to raise hundreds of millions of dollars.

Now, the Commission has a court order to stop the sale of AriseCoin cryptocurrency, which it says are unregistered investments. The regulator called the ICO an “illegal offering” of said securities and it accused the company of engaging in an “outright” scam.

AriseBank reportedly sought to raise $1B during its ICO, which began in late December and was scheduled to end later month. Investors were supposed to receive their distributions on February 10.

SEC Cases: Woodbridge Agrees to Pay Legal Fees for Investors Harmed in Alleged $1.2B Ponzi Scam, Hoplon Financial Group is Accused of $2.18M Securities Offering Scheme, and Ticket Reserve Settles Investor Fraud Charges

Published on: January 27, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Woodbridge to Appoint New Board to Run the Property Developer, Will Pay for Investor Fraud Lawyers
Woodbridge Group of Companies and the US Securities and Exchange Commission have come to an agreement that a New Board of Managers will be appointed to oversee the bankrupt property developer. The company, which is accused of running a $1.2B Ponzi scam, will pay for legal representation for its investors that continue to grapple with losses they may have sustained in the alleged fraud. Some 8,400 investors gave their money to Woodbridge.

Woodbridge owner Robert Shapiro is accused of owing over $961M to investors, many of them elderly investors, who purchased securities from the company while under the impression that they’d be guaranteed up to 8% interest. Investors were told that their money would be lent out to companies in exchange for up to 15% interest when, in fact, contends the SEC, these developers were entities that Shapiro himself controlled.

Shapiro, who is accused of taking at least $21M of investors’ funds to pay for his lavish lifestyle, denies the SEC’s allegations.

Goldman Sachs is Lead Plaintiff in Institutional Investor Fraud Lawsuit Against Startup Outcome Health

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

After backing Outcome Health, an advertising company, Goldman Sachs Investment Partners (GS) and other investors are among those suing the startup for fraud and to get their money back. The lawsuit, filed a couple of months ago, comes in the wake of allegations that investors were fooled by inflated information financial performances and were charged for ad space that they never received. Outcome denies any wrongdoing.

It wasn’t too long ago that the company was generating high profits and revenue, while investors were told that their returns were guaranteed. Just last spring, institutional investors, including Goldman, infused $478M into the ad company, which streams pharmaceutical advertising onto tablets and flatscreens at doctor offices.

According to the Wall Street Journal, there had been red flags even back then. The newspaper noted how even the “savviest investors” can miss or ignore warnings. For example, Outcome already had a lot of debt, including $325M for a loan. It also lacked an independent board to conduct oversight and its co-founders were poised to make an “unusually large payout.”