Investor Lawyers Blog

SEC Awards Two Whistleblowers $16M

Published on: November 29, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commision has awarded $16M to two whistleblowers—$8M each—for the crucial information and help they provided in bringing a successful securities enforcement action. If you consider that a whistleblower may be eligible for 10-30% of funds collected when the monetary sanctions of the SEC action that the individual helped to bring is greater than $1M, the sanctions imposed in this latest case must have been significant.

According to the regulator, one whistleblower reported a “particular misconduct” that became central to the SEC’s enforcement action. The other whistleblower provided additional key information and continued to cooperate with the agency during its probe. The latter’s contributions reportedly saved the Commission time and resources.

These latest awards bring the amount awarded to SEC whistleblowers—49 of them—to over $175M. Alleged wrongdoers accused in the regulators’ cases have been ordered to pay $1B in financial remedies, including over $671M in disgorgement.

$5.4M Senior Investment Fraud Allegedly Involved Penny Stocks

Published on: November 29, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In US district court, the Securities and Exchange Commission has filed a complaint accusing two people of senior investment fraud. According to the regulator, Angela Beckcom Rubbo Monaco and Joseph A. Rubbo of Florida bilked investors through offerings involving three of their companies.

The SEC’s complaint said that the two of them raised at least $5.4M from 11 mostly older investors. The money was supposed to go toward growing their entertainment businesses and help them develop the Spongebuddy, which was a “sponge-like” glove. Instead, claims the agency, Monacco and Rubbo misappropriated over $2.6M in investor money to pay themselves and family members, as well as to buy a car and cover other unrelated expenses. They also allegedly used the funds to pay “undisclosed sales commissions” to Steven J. Dykes, who solicited investors through cold calls.

The Commission stated that during the alleged senior investment fraud, all three defendants were not registered with the regulator. The companies owned by Rubbo and Monaco that are said to have been involved are VIP Television Inc., VIP TV LLC, and The Spongebuddy LLC.

Ponzi Scams: DOJ Begins Paying Distributions to Madoff Victims, Real Estate Investment Scam Allegations Lead to Guilty Plea, and SEC Seeks to Shut Down $38M “Ad Packs” Scheme

Published on: November 28, 2017 | by Shepherd Smith Edwards & Kantas, LLP

DOJ Begins Distributing Payments to Bernie Madoff’s Victims

Nearly nine years after Bernie Madoff was arrested for running a multi-billion dollar Ponzi scam, the US Department Justice has begun to pay out distributions owed to his victims. The money comes from the Madoff Victim Fund, a $4B fund set up for settlements paid by JPMorgan Chase & Co. (JPM), which was the bank that the Ponzi mastermind used, and the estate of Jeffry Picower, who was one of Madoff’s longtime customers.

This fund will pay back over 24,000 victims some $772M during the first round of distributions. Another fund, which is supervised by bankruptcy court, has already paid out over $10B to investors. Investors who will be paid by from Madoff Victim Fund are those that did not qualify for recovery under the bankruptcy proceedings.

NY Woman Pleads Guilty to Running An Investment Scam

Alisa Adler has pleaded guilty to two counts of wire fraud. Adler is the ex-head of ASG Real Estate Services Group.

FINRA Cases: Craig Scott Capital Expelled Over Excessive Trading Claims, CFD Investments Fined $30K to Resolve Inadequate Supervision Allegations Involving ETFs, and H. Beck Broker is Accused of Making Unsuitable Investment Recommendations

Published on: November 26, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Craig Scott Capital, LLC Loses FINRA Membership After Its Representatives Are Accused of Excessive Trading

The Financial Industry Regulatory Authority has expelled Craig Scott Capital, LLC over finding that three of the firm’s registered representatives allegedly engaged in excessive trading in the accounts of customers. The self-regulatory organization said that the charges imposed on customers, including markdowns, markups, and commissions, were not in line with the latter’s financial states and goals.

Now, FINRA is holding Craig Scott Capital accountable for the excessive trading, which it described as churning. This type of excessive trading involves making trades in a customer’s account in order to earn a commission.

FINRA is also accusing the firm of not putting into place and enforcing a “reasonable supervisory system” to prevent excessive trading and failing to properly supervise the registered representatives involved in the alleged wrongdoing so these behaviours could have been prevented. The regulator accused Craig Scott’s owners of not taking reasonable action even though they detected the red flags indicating that excessive trading might be taking place.

Ex-Nomura Holdings Manager Gets Prison Time for Insider Trading

Published on: November 25, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Avaneesh Krishnamoorthy, an ex-risk manager for Nomura Holdings Inc. in the USA, has been sentenced to three months in prison. Krishnamoorthy pleaded guilty earlier this year to securities fraud related to allegations that he traded on information about Golden Gate Capital LP’s plans to buy NeuStar Inc. He made $48K in the process.

The ex-Nomura risk manager, who was a firm vice president, purchased hundreds of NeuStar shares using an undisclosed brokerage account belonging to his wife. He did this after reading an internal confidential email about the planned purchase. Nomura helped finance the deal.

In September, the US Securities and Exchange Commission announced that a final judgment had been reached in its civil case against Krishnamoorthy. Under the terms of the judgment, the ex-Nomura holdings manager is permanently enjoined from violating sections of the Securities Exchange Act of 1934, rule 10b-5 thereunder, and the Securities Act of 1933. He also is liable for almost $79K of disgorgement that would be considered fulfilled either by submission of a forfeiture order in the criminal case against him or proof of payment. Additionally, the former Nomura VP was ordered to pay more than $1200K in interest and serve permanent bars from involvement in penny stock offerings and the securities industry.

SEC Cases: $15.7M Final Judgment Issued in Ponzi Scam that Touted Loans to Athletes, MicroCap Issuer is Accused of Accounting Scheme, and Company’s Assets are Frozen in the Wake of Alleged $5.3M Offering Fraud

Published on: November 25, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Regulator Orders Alleged Ponzi Scammers to Pay $15.7M Plus Interest
In its final judgement against ex-pro football player William D. Allen, Susan Daub, and three entities, the US Securities and Exchange Commission is ordering the defendants to pay over $15.7M in disgorgement of ill-gotten gains in addition to prejudgment interest for an alleged Ponzi scam that raised nearly $32M from investors. Allen, formerly of the Miami Dolphins, and Daub, who both pled guilty to related to criminal charges last year, have been sentenced to six years in prison. They must pay $16.8M in restitution for that action. The SEC’s order will be deemed met “based on the restitution order” in the criminal case.

The SEC’s complaint contends that Daub and Allen and the entities misled investors about the loans, which were supposed to go to professional athletes. Instead, they allegedly used just part of the money to issue the loans while using investors’ funds to cover nightclub and casino expenses, other ventures, and to pay back other investors.

Microcap Issuer and Its Ex-CEO Resolve Investor Fraud Allegations
Integrated Freight Corporation and its ex-chairman/CEO David N. Fuselier have settled SEC charges accusing them of investor fraud. Both Fuselier and the company, however, did not deny or admit to the allegations.

Securities Firms: JP Morgan Securities to Pay $1.25 For Inadequate Background Checks of Thousands of Employees and Gray Financial Group Settles with SEC Over Unsuitable Investments to Pension Funds

Published on: November 22, 2017 | by Shepherd Smith Edwards & Kantas, LLP

FINRA Orders JPMorgan Securities to Pay $1.25M
The Financial Industry Regulatory Authority said that J.P. Morgan Securities LLC (JPM) will pay $1.25M for not conducting proper background checks—or, in certain instances, conducting them but not in a timely enough manner—from 1/2009 through 5/2017 on 8,600 of its associated persons that were non-registered. According to the self-regulatory organization, this included the failure to properly fingerprint about 2,000 non-registered associated persons. The lapses kept the brokerage firm from knowing whether these individuals should be disqualified from employment.

Meantime, other non-registered associates persons who were fingerprinted were only screened for criminal convictions as they related to federal banking laws, as well as to list that was “internally created.” Still, said FINRA, four people who warranted disqualification due to a prior criminal conviction were allowed to work as non-registered associated persons.

Under federal securities laws, breakage firms must fingerprint certain associated staff even if they are employed in a non-registered manner because they could still pose a risk to customers otherwise. Fingerprinting allows for the identification of folk convicted of past crimes that may disqualify them from working for a firm in an associated role.

Hedge Funds Get Rid of Puerto Rico General Obligation Bonds After Hurricane Maria

Published on: November 22, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Reuters reports that Senator Investment Group, Monarch Alternative Capital, and Stone Lion LP—all hedge funds—have gotten rid of hundreds of millions of dollars of Puerto Rico general obligation bonds in the wake of the devastation caused by Hurricane Maria. Similarly, another hedge fund, Varde Partners, no longer has $136M of its COFINA debt. Investors have been hoping that the island’s bonds would rebound after the territory filed for bankruptcy earlier this year. Now, however, recovery for Puerto Rico is expected to take longer after the storm. Debt prices have dropped to drastic lows, while Maria has caused tens of billions of dollars in damages.

Meantime, in the U.S. mainland and on the island, investors continue to fight to recoup their losses sustained when Puerto Rico’s bonds and closed-end bond funds plunged in value more than four years ago. Our securities fraud lawyers have been working with investors to get their funds back. Many investors were not properly apprised of the risks involved in investing in these bonds. Quite a number of them should never have invested in these securities at all.

Still, brokers from Banco Popular, UBS Puerto Rico, Santander Securities, and other brokerage firms continued to tout these investments as low risk and profitable. Some financial representatives even encouraged investors to borrow funds so that they could invest more, resulting in further devastating consequences.

SEC Cases: NY Town Accused of Municipal Securities Fraud, Jay Peak Owner Accused in $200M Immigrant Visa Fraud Arrives at Tentative Settlement, and Financial Judgment is Reached in $110M Investor Fraud Against Inofin

Published on: November 21, 2017 | by Shepherd Smith Edwards & Kantas, LLP

SEC Files Fraud Charges Against Oyster Bay, NY

The US Securities and Exchange Commission has filed municipal securities fraud charges against the New York City of Oyster Bay along with John Venditto, who was a former supervisor of the town. According to the regulator, the Long Island Town and Venditto defrauded investors through 26 municipal securities offerings from 8/2010 to 12/15. A parallel criminal action has been brought against the ex-town supervisor.

The regulator’s complaint claims Oyster Bay and Venditto hid a number of side deals with a businessman who ran concession stands and restaurants at local facilities. Part of the deals included agreeing to “indirectly guarantee” a number of private loans totaling over $20M to this vendor. “Gifts, bribes, kickbacks, and political support” also were allegedly involved.

Investment Adviser Faces Charges That He Bilked Older Investors of $5.2M

Published on: November 21, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Daniel Glick, a Chicago investment adviser, is charged with wire fraud over allegations that he stole about $5.2M from elderly clients, including the parents of his wife. Glick was the owner of Glick & Associates Ltd., Glick Accounting Services, and Financial Management Strategies Inc.

He allegedly began bilking investors in 2011 through last April. The criminal information in his senior investor fraud case accuses Glick of promising clients that he would invest their funds and pay their bills but he instead created account statements that inflated investment balances while he used their money to buy a Mercedes, pay his mortgage, and pay back business loans. Glick is accused of making Ponzi-like payments to clients.

Among those whom he allegedly defrauded were his in-laws, whose signatures he is accused of forging to transfer their money to his own business account. They lost hundreds of thousands of dollars. Another family purportedly paid Glick $700K in fees even while he allegedly misappropriated hundreds of thousands of their dollars.