Investor Lawyers Blog

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.

SEC Stops $22M Texas-Based Securities Scam

Published on: May 20, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In federal court in Sherman, TX, the US Securities and Exchange Commission has filed an emergency action to halt a $22.7M mortgage investment scam involving Thurman P. Bryant, III and his Bryant United Capital Funding, Inc. According to the regulator’s complaint, Bryant and his firm raised about $22.7M from about 100 investors by making false promises, including telling them that the investments were free of risk and guaranteed 30% minimum yearly returns.

The SEC claims that Bryant told investors that his firm would fund the mortgages, which would be sold right away to third parties for a fixed fee. He allegedly informed them that their money would be left in secure escrow account as evidence of funds in order to obtain a credit line to cover the mortgage loans. Bryant and his firm are accused of violating the Securities act of 1933’s Section 17(a) and the Securities Exchange Act of 1934’s Section 10(b) and Rule 10b-5 thereunder.

According to the Commission, since the start of this year alone, Bryant has raised about $1.4M from investors. So far, Bryant’s firm has paid about $16.8M as supposed investment return and also as referral fees to investors who’ve helped identify additional prospective investors.

Ex-Hedge Fund Manager Pleads Guilty to $9M Investment Scam that Defrauded Investors Nearing Retirement

Published on: May 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Tamer Moumen, an ex-hedge fund manager, has pleaded guilty to wire fraud. He now faces up to 20 years in prison for a $9M investment.

Moumen defrauded over 50 investors. Many of his investors were close to retirement age. He advised dozens of them to liquidate retirement accounts, among other investments, and let him handle their funds.

Moumen used their funds to support his own spending, including the purchase of a $1M home, and also to pay back earlier investors. Moumen claimed to manage tens of millions of dollars through Crescent Ridge Capital Partners. He told clients he was a successful trader even though he lacked experience managing hedge funds and had lost money investing in securities before.

Ex-Nomura Head Traders Charged With Securities Fraud

Published on: May 18, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is charging two-ex Nomura (NMR) head traders with fraud. Kee Chan and James Im ran Nomura Securities International Inc.’s commercial mortgage-backed securities desk. The regulator claims that they purposely lied to customers to inflate profits for themselves and the firm. As a result, said the SEC, the two of them made an additional over $750K in trading profits for the desk. They received healthy bonuses as a result.

Commercial Mortgage-Backed Securities
CMBSs are asset-backed securities that have commercial real estate loans as their underlying assets. These debt obligations are often called bonds. CMBSs are illiquid securities.

According to the Commission, while serving as trade intermediaries with customers seeking to sell and buy CMBSs on the secondary market, Im and Chan made it seem as if they were working out bond purchases with a third-party seller at more than what Nomura paid to obtain the bonds. Im even allegedly told a customer that he had sought to deceive on purpose. Meantime, Chan is accused of modifying a customer email to protect his lie regarding a bond’s bid price.

Hedge Funds and Pensioners Scramble For Debt Payment Owed To Them By Puerto Rico

Published on: May 17, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In the wake of Puerto Rico’s bankruptcy filing, hedge funds are competing with the U.S. territory’s workers to get paid. The island has guaranteed retirees and workers $49 Billion in benefits. However, the federally appointed oversight board expects that it will have to cut pension costs by 10%.

Even worse for bondholders, they could get less than 25% of what bondholders are owed. This is true even for bondholders with General Obligation debt, which was supposed to have been constitutionally guaranteed. Creditors that own COFINAs, Puerto Rico sales tax bonds, are being offered up to 58 cents on the dollar should the territory’s finances get better. Both sides will appear in federal court in San Juan Puerto Rico in an attempt to try to work out a deal.

It was just recently that Puerto Rico’s oversight board submitted for Title III bankruptcy protection to help lower Puerto Rico’s $74 Billion of debt and deal with the Commonwealth’s pension crisis. Under Title III, the island can make pension recipients accept reduced benefits.