Investor Lawyers Blog

Securities Fraud: Former California Financial Adviser Who Worked For Texas Brokerage Firm is Barred After Bilking Professional Athletes of $2M, FINRA Fines Allstate Financial Services $1M for Inadequate Supervision, and Former Registered Investment Adviser Settles Cherry Picking Scam for $328K

Published on: December 20, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Financial Adviser Who Worked for Texas-Based Firm is Barred by SEC After Defrauding Pro Athletes
Ash Narayan, an ex-California financial adviser, has been barred by the US Securities and Exchange Commission. Narayan, who is accused of secretly receiving almost $2M from companies that he invested in on behalf of his professional athlete clients, agreed to no longer associate with advisory or brokerage firms to resolve the regulator’s allegations.

Narayan worked for Dallas firm RGT Wealth Advisors, but he was based in California as the managing director of its Irvine office. He also is accused of misrepresenting himself as a CPA and placing clients in unsuitable private investments. In October, the Certified Financial Planner Board of Standards issued a temporary suspension against him while an investigation was conducted into the allegations. RGT Wealth Advisers fired Narayan early this year.

According to the SEC, Narayan’s alleged fraud occurred between 2010 and 2016, during which time he directed $33M to a company that he was involved in and was in poor financial health. By settling, Narayan is not denying or admitting to the SEC charges.

Platinum Funds and Founder Mark Nordlicht Accused of $1B Ponzi Scam that Allegedly Bilked Over 600 Hedge Fund Investors

Published on: December 19, 2016 | by Shepherd Smith Edwards & Kantas, LLP

This week, the authorities arrested hedge fund founder Mark Nordlicht and several others over allegations that his Platinum Funds was involved in a $1B ponzi scam that defrauded over 600 investors. They also are facing civil charges brought by the US Securities and Exchange Commission. This is the largest Ponzi scam since the collapse of Bernard Madoff’s multi-billion dollar scheme that bilked investors of $50B.

According to the SEC, it discovered suspect activity during a probe of Platinum Partners and its flagship hedge fund advisory firms, Platinum Management LLC and Platinum Credit Management LP. The firms and Nordlicht are accused of inflating asset values, illicitly moving investor funds to conceal liquidity issues and losses, giving redemptions to the investors whom they favored, overstating the value of one oil company that was a huge asset, and making misrepresentations to bring in new investors during what internally was referred to in documents as a “Hail Mary Time.”

The SEC is accusing Nordlicht of colluding with two colleagues and an executive at Black Elk Energy, which is the funds’ oil investment, to divert nearly $100M from that company to give a “boost” to the Platinum funds. He and others allegedly manipulated a key vote to support Platinum’s position. Also, to meet investor redemption requests, the defendants allegedly took out high-interest rate loans, commingled money within the funds, and improperly raised funds from new investors.

Goldman Sachs Pays $120M Penalty to Settle USD ISDAFIX Rigging Allegations

Published on: December 18, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Goldman Sachs Group and Goldman, Sachs & Co. (GS) will pay a $120M penalty to settle Commodity Futures Trading Commission Charges accusing the firm of trying to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix, as well as of falsifying related reports to enhance its derivatives positions. The USD ISDAFIX is the global benchmark is for interest rate products. Its rates and spreads are tied to benchmarks for interest swaps and related derivatives, which in turn impact a number or currencies’ daily market rate. A number of local and state governments in this country, as well as pension funds, depend on instruments determined by USD ISDAFIX when hedging against certain interest rate changes.

Now, the CFTC wants Goldman to not only pay the civil penalty but also to cease and desist from the violations charged. The regulator contends that multiple Goldman traders, including the firm’s Interest Rate Products Trading Group head in the US, were involved in the alleged misconduct.

The CFTC said that Goldman, via its traders, engaged in transactions involving US treasuries, interest rate swap spreads, and Eurodollar futures contracts in a way specifically designed to impact the published interest rate benchmark. Goldman also purportedly tried to rig and make false reports about the USD ISDAFIX through these employees’ actions. These alleged acts were at the expense of clients and derivatives counterparties.

Mid Atlantic Capital Ordered to Pay Couple $922K Over KBS-Sponsored NonTraded REITs, Sonoma Ridge Partners Private Placement and Exchange-Traded Fund Investments

Published on: December 17, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority Panel is ordering Mid Atlantic Capital Corp. to pay David Wellman and Beverly Bien $922K. The married couple sued the independent brokerage firm for losses they sustained after they invested in Sonoma Ridge Partners (a real estate private placement), KBS-sponsored nontraded REITs, silver and gold exchange-traded funds (ETFs) like iShares Silver and Market VectorsGold Minors, and Contago Oil and Gas securities. They alleged that Mid Atlantic Capital Corp. was liable for negligent misrepresentation, negligence, omissions, breach of fiduciary duty, breach of contract, negligent supervision, restitution, common law fraud, and violation of Colorado’s Securities Act.

The couple was close to retirement age when they made the investments several years ago prior to the 2008 economic collapse. According to the couple’s legal team, among the issues that they believe were problematic is that Mid Atlantic’s two brokers that managed Sonoma Ridge Partners were not the same brokers who marketed and sold the private placement to investors. The claimants believe that this presented a conflict of interest.

Previously called the Jadda Secured Senior Mortgage Fund, Sonoma Ridge Partners was promoted as an alternative to low-yielding CD’s, as well as to the stock market with its volatility. It was supposed to render 9-11% annual yields. Also, although Bien bought most of the illiquid real estate investments, she lacked the required net worth necessary to qualify as an accredited investor under private placement industry rules.

Deutsche Bank Ends Dark Pool Probe with $37M Settlement to the NY AG and the SEC, as well as a $3.25M Fine to FINRA

Published on: December 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank AG (DB) has agreed to pay $37M to conclude the US government probes into its handling of trades in dark pool trading venues. The German bank also admitted that between 1/2012 and 2/2014 traders were misled about the way the it ranked its SuperX dark pool and other trading venues. The government settlements were reached with the US Securities and Exchange Commission and the New York Attorney General. Meantime, the Financial Industry Regulatory Authority fined Deutsche Bank $3.25M, noting “deficient disclosures” involving dark pool trading.

According to the NY AG and the SEC, Deutsche Bank told investors that it ranked its dark pools according to a number of factors, including transaction costs. However, some its technology purportedly wasn’t functioning correctly which means that the order-routing choices were not organized according to the factors noted. The German bank also is accused of disregarding its own method for ranking dark pools and placing its own dark pool in a preferred tier.

The government believes that between 1/2012 and 2/2013, Deutsche Bank employed outdated dark-pool rankings to decide how to route orders rather than updating its ranking model on a regular basis.The bank discovered the technical glitch in 2013, but did not fully correct the issue and waited until the following year to notify clients.

FINRA Bars Ex-JP Turner Broker For Elder Financial Fraud

Published on: December 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority has barred ex-JP Turner & Co. broker Anthony Mastroianni Jr. for allegedly churning an account belonging to an older customer. Mastroianni has not denied or admitted to the regulator’s findings and he did not appear in front of FINRA to provide testimony in this case.

According to the regulator, from ’11 to ’13, Mastroianni took part in churning or excessive trading in the account of this customer, which was maintained at JP Turner and later at Alexander Capital when the broker was affiliated with the brokerage firms. He also allegedly borrowed $90K from the same customer and made another four transactions without letting either JP Turner or Alexander Capital know and/or getting their approval.

Mastroianni’s BrokerCheck reports notes that there are seven disclosure events in which he has been named, including two customer disputes that are still pending.

Criminal Securities Fraud: Former Train Babcock Financial Adviser Pleads Guilty In $1.6M Family Trust Theft, Prosecutors Go After Former Cantor Fitzgerald Trader for RMBS Fraud, & Two NJ Traders Are Charged in $26M Stock Rigging Case

Published on: December 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Financial Advisor Admits to Stealing $1.6M From Family’s Trusts
Brian Keenan, an ex-financial advisor, has pleaded guilty to criminal charges accusing him to stealing over $1.6M from three trusts belonging to members of the same family. Keenan had been employed with Train Babcock Advisors from about 5/2007 to 8/2012. It was during this time that the former financial adviser stole over $1.6M from the beneficiaries of three trusts.

Not only did Keenan take their money, but he also spent the funds on his own expenses. He set up a joint checking account under his name and the name of one of the beneficiaries, and he issued over 40 checks from the trust accounts to the joint account. The beneficiary under whose name he co-opened the account did not have access to it.

Issuing a statement about the financial fraud case, Manhattan District Attorney Cyrus R. Vance reminded the public that a financial adviser’s main duty is to act in a client’s best interest. Vance said that rather than fulfilling that obligation, Keenan took advantage of his clients. Keenan pleaded guilty to Grand Larceny in the First Degree.

Former LPL Financial Adviser/North Carolina Broker Is Sentenced in $1.4M Ponzi Scam

Published on: December 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Charles Caleb Fackrell is sentenced 63 months behind bars and three years of court supervision. The 36-year-old former North Carolina financial adviser, who worked with LPL Financial (LPLA), pleaded guilty to one count of securities fraud earlier this year. He now must pay his victims nearly $820K in restitution.

According to court documents, Fackrell ran an investment scam from approximately 5/2012 to 12/2014. During this time, he solicited about $1.4M from at least 20 investors. The companies he ran included Robin Hood LLC, Robin Hood Holdings LLC, Robinhood LLC, and Robinhood Holdings LLC.

Prosecutors contend that instead of using investors’ money as intended, Fackrell enriched himself in what North Carolina Secretary of State Elaine Marshall has described as “one of the most vicious financial crimes” the state has seen.

$11B RMBS Fraud Lawsuit Against Credit Suisse to Proceed

Published on: December 13, 2016 | by Shepherd Smith Edwards & Kantas, LLP

According to the Appellate Division, First Department in New York, the state’s attorney general can move forward with his $11B investor fraud case against Credit Suisse (CS). The state appeals court decided that in this residential mortgage-backed securities lawsuit, a six-year statute of limitations and not a three-year one was applicable.

The civil case was brought in Manhattan Supreme Court four years ago. It accuses the several of the bank’s units of wrongly persuading investors to buy toxic residential mortgage-backed-securities in 2006 and 2007. The complaint states that 24% of Credit Suisse’s loans that were tied to RMBS from those two years were liquidated. Investors went on to sustain $11.2B in losses.

In a 3-2 ruling, the justice’s panel said that NY AG Eric Schneiderman’s fraud claims are ones that may have been brought prior to the writing of the statute. As a result, wrote the justices, the lengthier statute of limitations is to what this case is subject.

Prudential Stops Selling My Term Life Insurance Policies Through Wells Fargo

Published on: December 12, 2016 | by Shepherd Smith Edwards & Kantas, LLP

This week, Prudential Financial Inc. (PRU) announced that is no longer distributing certain term life insurance policies, including its My Term product, through Wells Fargo’s (WFC) retail bank. The decision comes after Prudential employees filed a complaint claiming they were let go because they reported certain sales practices related to insurance policies. The insurer says it intends to probe the “full extent of abuses” that may have resulted from the Wells Fargo-related transactions. Prudential sold about 15,000 My Term accounts through the bank.

The employee lawsuit is Julie Han Broderick et al v. The Prudential Insurance Co. of America et al. The three plaintiffs, which include Han Broderick, Thomas Schreck, and Darron Smith, are seeking unspecified damages for wrongful termination. Prudential, however, claims that the reasons they were let go have nothing to do with its business with Wells Fargo but, rather, were related to an ethics complaint.

According to the NY Times, the ex-employees filed their complaint against Prudential and a regulatory officer, contending the following:

They were let go as retaliation for their whistleblowing activities involving Wells Fargo’s allegedly fraudulent practices around the sales of My Term insurance policies
The plaintiffs (formerly supervisors in Prudential’s investigative division of its legal department) believe the purported fraud was due to Wells Fargo cross-selling programs
They were fired because they would not take part in PRudential’s alleged cover-up of fraudulent and unlawful business practices it engages in with Wells Fargo Bank