Investor Lawyers Blog

Three Companies and Their Principals Accused of $11.7M Texas Oil and Gas Offering Fraud

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

The US Securities and Exchange Commission has filed civil charges against Ameratex Energy, Inc., Lewis Oil Company, Lewis Oil Corp., their CEO Thomas Lewis, and ex-Ameratex President William Fort over their alleged involvement in an $11.7M Texas oil and gas offering fraud. The companies are based in Plano, Texas.

According to the regulator, the companies and the two men sold unregistered securities to more than 150 investors while making misleading statements about how the proceeds would be used. They also allegedly provided false information regarding prospect wells and sales commissions, as well as provided “false guarantees” regarding the lending out and mingling of funds.

The securities that they offered were not registered with the SEC. The individuals selling the investments were not licensed brokers or associated with brokers that were registered.

SEC Fights to Stop Fraud Scam Targeting Small Businesses

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

The US Securities and Exchange Commission has filed civil charges against “repeat securities law violator” Steven J. Muehler, who it has barred from associating with any broker-dealer since 2016. Once again, the regulator is accusing him of defrauding small businesses.

Muehler and his companies Altavista Capital Markets LLC, Alta Vista Securities, LLC, and Alta Vista Private Client, LLC—all unregistered brokerage firms— offered broker-dealer services to a number of small business clients. Services include finding investors and raising money from them through an online securities change that was supposedly proprietary. In exchange, fees were paid to Muehler and his brokerage firms, as well as rights to a percentage of the funds raised and equity in each business.

Muehler and his firms claimed that they have been successful in raising millions of dollars on clients’ behalf. However, in a previous SEC case, he admitted defrauding small businesses.

Ex-Georgeson Employees Accused of Trading Bribes for Information Are on Trial for Fraud

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

Four ex-Georgeson LLC employees are now on trial for fraud. Michael Sedlak, Charles Garske, Donna Ackerly, and Richard Gottcent are accused of bribing an Institutional Shareholder Services (ISS) employee for information about the way Georgeson’s investor clients vote on shareholder proposals. Georgeson is a proxy solicitation firm. ISS is registered with the US Securities and Exchange Commission as an investment adviser.

According to prosecutors, the ISS employee, Brian Bennett, was given $14K in bribes in the form of tickets to different events, including a U2 concert and Boston Red Sox baseball game, as well as for meals and an airline ticket. Assistant U.S. Attorney Eric Rosen told a federal jury that the purpose of procuring the information was to obtain an illegal advantage in their work, which involved representing companies when there are shareholder votes. Rosen said that the defendants were “not entitled” to these “secrets” that they purchased.

It is the job of proxy advisory firms to give information and recommendations to institutional investors about proposals that publicly traded company shareholders are expected to vote on. These firms collect information about institutional investors’ holdings and public votes and they share that information with publicly traded companies. This allows proxy solicitors and their clients to assess how certain shareholder votes on proposals will likely go, which can help clients figure out how they might affect certain shareholder votes.

Financial Firm News: Hilliard Lyons Must Pay $445K to Elderly Investor, Merrill Lynch Ordered to Pay Vermont $140K After Broker Makes Unauthorized Changes, and FSC Securities Settles with Montana Regulators

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

FINRA Panel Orders Hilliard Lyons to Pay Damages to Elderly Client

In a Financial Industry Regulatory Authority arbitration case, Hilliard Lyons is ordered to pay 84-year-old Elizabeth Nickens $445K in damages for losses she sustained from alleged churning and unauthorized trading. Nickens claims that advisor Christopher Bennett made transactions without her authorization in her retirement accounts, and her assets were allocated in such a way that were not suitable for her or investment goals.

Nickens, as an older investor, had a low risk tolerance and was more interested in preserving her funds. Yet, according to her attorney, more than half of her average account equity was in four stocks. She lost over $300K.

Hilliard Lyons is accused of not properly supervising the trades. The firm and Bennett deny the senior financial fraud allegations.
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Judge Rules that Martin Shkreli Will Be Held Responsible for $10.4M in Investor Losses

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

Us District Court Judge Kiyo Matsumoto has ruled that Martin Shkreli is going to be held responsible for $10.4M in financial losses sustained by investors after he is sentenced for his crimes. Shkreli, who was found guilty of two counts of securities fraud and one count of conspiracy to commit securities fraud, had tried to argue that he wasn’t responsible for those losses, seeing as investors eventually profited when he partially paid them back with Retrophin stock while he was the CEO of that pharmaceutical company.

The fraud charges are related to his running of the investment funds MSMB Capital, Elea Capital, and MSMB Healthcare. Federal prosecutors accused him of bilking investors of more than $11M in a Ponzi scam. Shkreli also is accused of lying to investors, including failing to tell them when two of the hedge funds he operated failed. Prosecutors contend that Shkreli was the cause of somewhere between $9M and $20M in investor losses.

Judge Matsumoto’s ruling regarding Shkreli’s financial responsibility is more about determining the length of the recommended prison term he should get and not about how much he owes the government, along with his sentence. With this latest ruling, Shkreli could face up to 20 years behind bars. Previous to that, his defense attorneys were hoping to get him either no time in prison or under 16 months. However, the higher the loss involved in a crime, federal guidelines recommend the calculation of a longer prison term.

Ex-Wells Fargo Broker Barred for Alleged $180K Elder Financial Fraud

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

The Financial Industry Regulatory Authority has barred Jeffrey Palish, an ex-Wells Fargo (WFC) broker in the wake of allegations of senior investor fraud. The regulator is accusing him of stealing over $180K from an elderly client with no plans or means of paying her back.

Palish was let go by the firm last year after an internal probe found that he had made misstatements about these transactions. He was arrested last week in New Jersey and charged with theft by deception involving over $75K.

According to prosecutors, Palish may have stolen at least $600K from elderly clients and failed to pay back a $100K loan from two clients. NorthJersey.com reports that Palish took clients’ money by selling their stock holdings and putting the funds from those sales into a bank account in which he deposited checks from clients. He also is accused of making more than three dozen unauthorized wire transfers of about $300K in total to pay his credit card bills.

Deutsche Bank Settles Libor Manipulation Lawsuit for $240M

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

In a preliminary settled reach in a private US antitrust lawsuit, Deutsche Bank AG (DB) will pay $240M to settle allegations that it conspired with other banks to rig the London interbank offered rate (Libor) benchmark. The plaintiffs in the Libor manipulation lawsuit are “over-the-counter” investors that engaged directly in transactions with banks belonging to the panel tasked with determining the key benchmark.

Banks use Libor to establish rates on mortgage, credit card, student loan, and other transactions, as well as to figure out how much it would cost to borrow from one another. Libor is expected to be phased out before 2022.

Despite settling, the German lender denied any wrongdoing. The settlement must still be approved by a court before it is final.

UBS Must Pay Five Clients $521,000 Over Puerto Rico Bond Fraud

Published on: February 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority panel has awarded five people $521,000 in compensatory damages in their Puerto Rico bond fraud case against UBS Financial Services (UBS) and UBS Financial Services Inc. of Puerto Rico (UBS-PR). The claimants had accused the financial firm of securities fraud, constructive fraud, common law fraud, negligent supervision, breach of fiduciary duty, and violating the Puerto Rico Uniform Securities Act.

UBS has been the subject of hundreds of FINRA arbitration claims brought by thousands of investors who sustained losses from Puerto Rico bonds and closed-end bonds, with many UBS-PR customers contending that they sustained massive losses because these investments were inappropriately recommended to them. To date, the financial firm has been ordered to pay or agreed to pay in settlements hundreds of millions of dollars to investors, with more claims still pending.

For over four years, our Puerto Rico bond fraud law firm has worked with investors on the island and the U.S. to help those investors recover their losses from losses in Puerto Rico securities. Contact Shepherd Smith Edwards and Kantas today to request your free, no obligation consultation.

CFTC News: Regulator Warns Customers, Including Experienced Investors, About Virtual Currency Pump-and-Dump Scam and Enhances Fraud Enforcement Efforts

Published on: February 23, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In its first customer protection advisory regarding pump-and-dump scams involving virtual currencies, tokens, or digital coins, the US Commodity Futures Trading Commission cautioned that even seasoned investors could be targeted. The regulator recommended that customers do a good job of researching prospective investments, learn the signs of possible investment fraud, and stay away from investments that “they don’t fully understand.”

Pump-and-dump scams typically involve raising the demand for a stock, and as a result, its share price, before dumping whatever shares are left so that the stock price drops. Remaining investors are left with practically worthless stock while the fraudsters usually have made a profit from dumping (selling) their shares when the stock price was still high. The CFTC is cautioning that this same fraud is now being used with virtual currencies.

Online message boards, mobile messaging applications, and other new technologies are now taking the place of boiler rooms to handle the solicitation of money from prospective investors, with some chat rooms holding thousands of members. It is also that fake news about these virtual investments is being published.

Investor Fraud: Strong Investment Management Faces Allegations of Cherry Picking, a $2.5M Financial Scam Leads to Convictions, and a Former Investment Adviser Is Sentenced to Serve Prison Time

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

SEC Accused Investment Adviser of Profiting from Cherry Picking

The US Securities and Exchange Commission has filed a civil fraud case against Strong Investment Management, which is a California-based investment adviser, and its president/owner Joseph B. Bronson. The regulator is accusing them of running a cherry picking scam that defrauded the firm’s clients.

The Commission contends that Bronson used Strong’s omnibus account to trade securities but would wait to see how they performed during the day before distributing them to certain client accounts. Meantime, Bronson purportedly made healthy profits at cost to clients by cherry picking the trades. He is accused of giving himself trades that were profitable while sending unprofitable ones to firm clients.

The SEC’s complaint contends that in Forms ADV, Bronson and Strong misrepresented trading and allocation practices by falsely stating that every trade would be allocated according to the terms of pre-trade allocation statements with no preference granted to any account. Bronson’s brother, ex-Strong chief compliance officer John B. Engebreston, is accused of not fulfilling his job by failing to make sure that Strong’s policies and procedures for trade allocation were followed. He also is accused of “repeatedly” ignoring “red flags” when it came to Strong’s allocation practices.