Investor Lawyers Blog

FINRA Cautions Investors About Scams Involving the Impersonation of the SRO

Published on: February 10, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is warning investors to watch out for financial schemes in which the fraudsters are pretending to be the self-regulatory organization. FINRA released its Investor Alert noting that there have been scammers using its FINRA logo and name. In some instances they are even forging the signature of FINRA president and CEO Robert W. Cook to try and solicit funds for fraudulent investments. Use of FINRA’s name appears to be geared toward making the scheme appear legitimate.

For example, an investor contacted the SRO to report one instance that purportedly involved the fraudster sending a letter that was supposedly from Cook and guaranteeing a proposed investment. The letter, however, had a number of errors, including mistakes involving FINRA’s name and its leadership titles. Another alleged fraud involved e-mail pitches, again purportedly from Cook. The correspondence told targets that their outstanding inheritance fund had been “approved for release.” They were instructed to go abroad (beyond the jurisdiction of US authorities or regulators) to obtain this money. Meantime, the targets were asked to share certain personal data.

A regulator imposter fraud might ask the victim to pay an advanced fee. In such scams, investors are asked to pay certain fees related to the purchase of stock shares that, in truth, are not doing well or are “virtually worthless.” However, upon sending the funds, investors rarely see the money returned to them or the funds that a stock buyback was supposed to render. The fraudster may even ask for more money.

Ex-Morgan Stanley Executive is Sentenced in Multimillion-Dollar Fraud That Targeted Widow

Published on: February 9, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Gregory Walsh, a former Morgan Stanley (MS) Assistant Vice President, is sentenced to two years in prison and three years’ supervised release. Last year, Walsh pleaded guilty to conspiracy to commit mail fraud and wire fraud that involved defrauding a firm client of $4.8M.

Court documents state that in 2011 Walsh and his brother, ex-Bank of Oswego VP Geoffrey Walsh, convinced a Morgan Stanley client who was newly widowe, to lend Geoffrey over $1.1M to buy three condos in Palm Springs that would be put in her name and then sold. Instead, Geoffrey made his business the title owner of the properties and did not give the widow the documentation for the title or loan. He then sold two of the properties without her consent or knowledge and used the money for his own expenses instead of giving her the funds. When Gregory Walsh discovered what his brother had done, he did not tell his client.

In 2013, the brothers sought $2M from her for a real estate development project. Gregory did not tell the widow that his brother was involved when she asked. He then withdrew funds from her Morgan Stanley account without her consent or knowledge. In 2013, $1.7M of that money was used to pay off a credit line at Bank of Oswego for Geoffrey, who spent the rest of her funds that had been withdrawn.

Securities Firm News: Rabobank NA to Pay Almost $369M After Pleading Guilty to Felony Conspiracy, Alabama Supreme Court Says Lawsuit Against Sterne Agee Can Proceed, and Maryland Wealth Management Firm is Accused of Fraud

Published on: February 9, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Rabobank NA Admits to Anti-Money Laundering Deficiencies, Will Pay Nearly $369M

Rabobank National Association, a subsidiary of Rabobank UA (RABO), has pleaded guilty to felony conspiracy for obstructing the Department of the Treasury’s Office of the Comptroller of the Currency’s examination of the bank while hiding that its anti-money laundering program had certain deficiencies. Now, the firm will pay almost $369M for not preventing illicit funds from going through the bank.

With its guilty plea, Rabobank is admitting that it conspired with a number of its ex-executives to try defrauding the US by “unlawfully impeding” the OCC’s efforts to regulate the California subsidiary, including obstruction of an OCC examination of the bank’s branches throughout the state. Rabobank acknowledged that because of deficiencies in its AML program, the bank made it possible for hundreds of millions of dollars from Mexico and other places to be deposited in its rural bank branches and then allowed to money to move via checks, wire transfers, and withdrawals. Federal regulators were not notified even though they should have been.

During a 2012 OCC examination, Rabobank executives purposely tried to “hide and minimize” its AML program deficiencies so as to avoid new sanctions. Rabobank was already sanctioned in ’06 and ’08 for failures that were “nearly identical” to the ones at issue now. Late last year, ex-Rabobank VP George Martin reached a deferred prosecution deal with the US government for aiding and abetting the bank in not having an AML program that met Bank Secrecy Act requirements.

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.”