Investor Lawyers Blog

NY Man is Charged in $70M Investor Fraud

Published on: May 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In yet another investor fraud case in which the alleged fraudsters touted the sale of tickets from the musical Hamilton, Jason Nissen is charged with wire fraud in a $70M Ponzi scam. According to prosecutors, the CEO of National Event Co. raised money by falsely claiming that he would use investors’ funds to purchase and resell wholesale tickets for premier events, including the Broadway hit and the Super Bowl.

Although Nissen did buy tickets with some of the money, most of the funds purportedly did not go toward ticket purchases. According to court filings, what Nissen allegedly was actually doing with the funds was paying back earlier investors. After running out of new funds this month, he purportedly admitted to two investors that he’d bilked them. He also allegedly said that he’d forged documents to conceal his scam.

Among Nissen’s alleged victims are a diamond wholesaler that lent him $32M and a private equity firm, which gave him $40M to invest. This same firm owns part of National Event Co.

Securities Cases: David Lerner Associates Settles Nontraded REIT Sales for $700K, RBS Resolves Investor Lawsuit, and HSBC Holdings Settles More Libor Rigging Claims

Published on: May 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

David Lerner Associates to Pay NJ Over Nontraded REIT Sales

David Lerner Associates has agreed to pay a $700K penalty to resolve allegations accusing it of illegally selling nontraded real estate investment trusts in the state of New Jersey. In the consent order from the New Jersey Bureau of Securities, the firm also agreed to pay $50K to a fund for investor education, as well as $100K for costs.

At issue are the nontraded REITs Apple 9, Apple 8, and Apple 7. In early 2014, the three REITs merged together and became Apple Hospitality REIT Inc (APLE). Investors complained to the state regulator about the sale of the three REITs, which raised money to purchase hotels. After the NJ regulator contacted the firm about possible failures in its compliance system related to the sale of the non-traded real estate investment trusts, David Lerner Associates said it would assess its sale of the REITs there.

BNP Paribas Settles NY Currency Rigging Investigation for $350M

Published on: May 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

BNP Paribas will pay the New York Department of Financial Services (DFS) $350M to settle a probe into allegations that it was involved in currency rigging in the bank’s foreign exchange business. In a statement, the French bank said that it “deeply regrets” the misconduct, which took place between ’07 and ’13.

The DFS said that over a dozen BNP Paribas sales people and traders in NY as well as other trading hubs rigged forex rates and took part in other illegal activities. BNP Paribas traders worked in online chat rooms with traders from competing companies, making fake trades and improperly sharing customer information that should have stayed confidential. Members of the bank’s sales team are also accused of misleading customers regarding prices.

Among the alleged misconduct cited by the DFS is that of a BNP Paribas trader in NY who is accused of not only rigging different currencies but also of executing bogus trades overnight to move rates and then frequently cancelling the trades within seconds of making them. In another example cited, one of the bank’s traders in Japan allegedly improperly disclosed customer information involving yen trading with several competitor traders.

Judge Stops $16 Million Interest Payment on COFINA bonds in Puerto Rico Bankruptcy

Published on: May 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In Manhattan federal court, U.S. District Judge Laura Taylor Swain has blocked a $16.3 million interest payment that is due to COFINA bondholders on June 1 (COFINA bonds are those issued by the Puerto Rico local taxing authority and that are supposed to be supported by Puerto Rico sales taxes). Judge Swain said that future payments also have been suspended until a number of disagreements over who should receive the funds are settled. This marks the first time a payment on COFINA bonds will not be made.

Judge Swain is tasked with presiding over Puerto Rico’s Title III bankruptcy case, which is meant to restructure the over $70 billion of debt that the U.S. territory owes. In addition to this latest halt, Swain has decided to wait to resolve two other disputes, including whether COFINA is in default on the $17 billion of debt that is its responsibility and if general obligation bondholders are entitled to receive sales-tax receipts that are backing COFINAs as payment.

Although general obligation bondholders and COFINA holders have been in disagreement over bond payments for some time, fighting also has now erupted among senior COFINA holders and junior COFINA holders regarding how interest should be distributed, with the senior contingency claiming that they should receive full payment before the junior COFINA holders receive anything. Junior COFINA holders want $5 million of the interest on subordinated bonds. They also want their claim on COFINA funds preserved.

More Pro Athletes Victimized by Fraud

Published on: May 27, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Prosecutors have indicted a California man over his alleged involvement in an investment scam that bilked an ex-NFL player of $4.5M. Kenneth Ray Cleveland faces multiple counts of money laundering and wire fraud.

The 63-year-old money manager served as the NFL player’s financial adviser for years beginning when the ex-pro athlete, who played with the Indianapolis Colts for several years, graduated college and joined the NFL. Court documents don’t name the victim.

According to prosecutors, Cleveland used $2M of the ex-NFL athlete’s funds to pay other clients in a Ponzi scheme he allegedly ran. The money manager used another $2M of the player’s money to cover his own expenses, including his mortgage.

Securities Fraud Cases: Ponzi Scam Operator Sentenced to Prison, Fund Manager Pleads Guilty, Ex-Options Trading Instructor Allegedly Misappropriated Investor Funds, & $1.7M Financial Scam Leads to 10-Years Behind Bars

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

SEC Charges Man Accused of Running $10M Ponzi Scam
Mark Anderson Jones, whom the US Securities and Exchange Commission has charged with fraud, has been sentenced to 70 months in prison in a parallel criminal case. Jones pleaded guilty to running a $10M Ponzi scam.

According to the SEC, Jones solicited investors in a number of US states, as well as in Washington DC. He did this by issuing promissory notes, as well as providing personal guarantees to clients that were willing to invest in The Bridge Fund, which supposedly lent money to Jamaican businesses that were waiting to get commercial bank loans.

However, rather than investing their money the way he said he would, Jones used a portion of investors’ cash to pay his own expenses as well as make Ponzi payments.

Massachusetts Hedge Fund Manager Faces Criminal and Civil Fraud Charges Over Alleged Multi-Million Dollar Ponzi Scam

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

Over the weekend, Yasuna Murakami, a Cambridge-Massachusetts based hedge fund manager, was arrested and charged with wire fraud. Murakami, who managed MC2 Capital Management LLC, is accused of misappropriating investors’ funds in a Ponzi-like scam. The arrest and criminal charges come a few months after the state’s regulator, Secretary of the Commonwealth William Galvin, filed his own administrative case against Murakami for the fraud.

Prosecutors are accusing the hedge fund manager of seeking to bilk investors. The MC2 Capital Canadian Opportunities Fund was supposed to grant American investors exposure to a Donville Kent Asset Management-supervised fund. Instead, Murakami allegedly misused investors’ money to pay for his bills, including purchases at expensive department stores, as well as to make his own investments in the fund.

He is accused of using investors’ money to pay other investors in two other MC2 hedge funds and allegedly misappropriating money from those funds. Under the charging statute, If convicted, Murakami could face up to 20 years in prison, supervised release, a fine, and be ordered to pay up to two times the gross loss or gain.

Thousands of Madoff’s Ponzi Scam Victims Have Yet to Get Any of Their Money Back

Published on: May 24, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Eight years after Bernard Madoff was sentenced to 150 years in prison for defrauding investors in a $65 billion Ponzi scam, thousands of his victims have still not seen any of the money that they lost. These investors’ claims are being handled by Madoff Victim Fund administrator Richard Breedon, whose firm RCB Fund Services was retained by the federal government to give $4B back to them.

Breeden had estimated last year that up to 40,000 victims would get their first recovery checks by the end of 2016. That didn’t happen. Now, he has stated that the initial distribution will happen this year and will be larger than what would have gone out previously. Claims processes and inadequate paperwork by some investors were some of the reasons cited for the delay.

It is Breedon’s job to recommend to the federal government which claims to reject or pay. His fund accepts recovery claims from all of types of investors who entrusted their money to Madoff, including feeder funds. Breedon’s fees come out of investors’ recovery.

Ex-Deutsche Bank Executives Reportedly to Pay for Misconduct

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

At the yearly general meeting in Germany, Deutsche Bank AG (DB) told shareholders that the German lender is nearing an agreement with ex-executives in which they would have to help pay for the fines that the financial institution paid for their past misconduct. Deutsche Bank has been trying to determine whether it could hold these former executives liable for the different regulatory investigations to which it has been subject. An agreement is expected in the next months.

Bloomberg reports that according to Deutsche Bank CEO John Cryan, former management teams made the German financial institution “too complex and inefficient” when they placed short-term earnings before long-term interest. As a result of misconduct fines that Deutsche Bank was ordered to pay, it experienced two years of losses in a row, not to mention that earlier this year, the German lender agreed to pay US regulators $7.2B because of the way it dealt with mortgage-backed securities leading up to the 2008 financial crisis.

Meantime, along with Nomura Holdings (NMR), Deutsche Bank is dealing with other fraud allegations,this time in Italy for allegedly aiding Banca Monte dei Paschi di Siena S.p.A. in hiding the latter’s losses. In the use of complex derivative trades, thirteen ex-managers at all three banks have been charged with market manipulation and false accounting. The German bank also is accused of running an international crime organization during the relevant period.

Investors Continue to Pursue Puerto Rico Bond Fraud Recovery From Santander Securities

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

Although many of the thousands of cases investors in Puerto Rico bonds and closed-end funds have brought over the last three years have focused on UBS Financial Services Incorporated of Puerto Rico (“UBS-PR”), other brokerage firms in the Commonwealth engaged in the same wrongful sales practices. One such firm that has also been the subject of many FINRA arbitrations and other lawsuits is Santander Securities, LLC (“Santander”), a division of Banco Santander Puerto Rico.

Bloomberg reports that between the ends of 2012 and 2013, Santander marketed and sold over $280 million in Puerto Rico municipal bonds and close-end funds while getting rid of its own holdings of these same securities. In 2015, Santander settled allegations from FINRA of deficiencies in Santander’s structured product business, including those involving the sale of reverse-convertible securities to Puerto Rican retail customers when such investments were often unsuitable for them. FINRA also accused the brokerage firm of inadequate supervision of structured product sales. Santander agreed to pay customers over $7 million for their losses from reverse convertible securities.

In other Puerto Rico news, the office of the U.S. Trustee announced that it will appoint a committee of retired persons to negotiate for pensioners in the wake of the Commonwealth’s recent bankruptcy filing. The island is carrying about $50 Billion in unfunded pension liabilities, in addition to the more than $70 Billion in bond debt it still owes. At the first bankruptcy hearing for Puerto Rico, the island’s main creditors expressed interest in continuing mediation talks to figure out how to deal with these debts. Among those seeking repayment of the debts owed to them are general obligation bondholders and Cofina bondholders.