Investor Lawyers Blog

JPMorgan to Pay $150M to Pension Funds Over London Whale-Related Losses

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

A U.S. district court judge has approved a settlement reached at the end of last year between JPMorgan Chase & Co. (JPM) and pension funds related to trades made by Bruno Iksil, who earned the nickname “London Whale” because of his huge market-moving positions in credit derivatives. In their class action securities case, the plaintiffs accused the firm of using its chief investment office in London as a secret hedge fund and hiding up to $6.2M in losses.

Even though the office was supposed to be primarily for managing risk, the plaintiffs believe that it was making high-risk trades for profit, including trading in complex credit derivatives. Depositors’ money was purportedly used in secret for making certain trades. Shareholders claim that JPMorgan knew about the increased risks it was taking and hiding them.

JPMorgan has not admitted to wrongdoing by settling this deal. However, it was also fined over $1B by regulators in the U.K. and the U.S. for management deficiencies related to the London Whale scandal.

SandRidge Energy Stock Losses Has Cost Investors Over $7B

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

A sharp drop in the stock of SandRidge Energy Inc. (SDOC) has led to catastrophic losses of more than $7 billion for investors. Just last week, SandRidge Energy shares traded down at 3.8%, dropping to $0.0654. More than 2.3 million shares of the stock were exchanged. According to DailyPolitical, SandRidge Energy stock hit a 12-month high of $1.56; its low was $.03. This week, SandRidge Energy said it would not be able to file its quarterly results on time.

Unfortunately, brokerage firms and financial advisers may have recommended SandRidge Energy stock to investors as a safe proposition even for those seeking conservative, low risk investments. Instead, for some investors, the losses have been devastating.

SeekingAlpha.com reports that the Oklahoma-based oil and natural gas company is doing so poorly that it could file for Chapter 11 bankruptcy by early next month. According to Reuters, the company is talking to creditors about a possible debt restructuring deal. SandRidge reportedly wants creditors to agree on how debt could be lowered with the hope that this would restrict how much time it has to stay in court should it seek bankruptcy protection.

On December 31, the company had $3.6B in debt. Its market capitalization is $70B. It will owe interest on June 1.

Analyst Ratings Network reports that in a recent research note, Zacks Investment Research downgraded SandRidge Energy Inc. to a “sell” rating from a “hold” one. It was just last March that the company reported $.09 earnings/share for the quarter.

SandRidge Energy Stock Claims
Shepherd Smith Edwards and Kantas, LTD, LLP is investigating claims of investors who have lost money in an investment in SandRidge Energy stock that they bought at the recommendation of a financial advisor. Contact our oil and gas fraud law firm today.

SEC Says Pennsylvania Financial Adviser Bilked Professional Athletes

Published on: May 11, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission is filing fraud charges against Louis Martin Blazer III, a Pittsburgh-based financial adviser. Blazer founded Blazer Capital Management—a firm that works with high-net worth individual clients and professional athletes. He allegedly took money out of the accounts of these athletes without their permission so he could issue Ponzi-like payments and invest in movies.

The SEC contends that Blazer took about $2.35M from five clients and invested in two movie projects. One client had even rejected the opportunity to invest in the films and still Blazer purportedly took $550K from this person’s account and invested the funds. After the client found out about the authorized investment and demanded his money back, Blazer allegedly used from another athlete’s account to pay the other client back, forging the second client’s signature on documents to initiate the transfer of $650K. He used $550K of that to pay back the first client. He purportedly used the remaining $100K to invest in a music venture on behalf of Blazer Capital.

When SEC examiners discovered the unauthorized transactions made in clients’ accounts, Blazer allegedly lied about them and turned over false documents that he had created to conceal his misconduct. He said that clients had authorized the transactions.

Texas Securities News: Round Rock Man Goes to Jail Over $4.5M Ponzi Scam, Linn Energy Files for Bankruptcy, Judge Says Wyly Brothers Committed Tax Fraud

Published on: May 11, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Texas Oil and Gas Ponzi Scam Leads to 13-Year Prison Term
The owner of RHM Exploration has been sentenced to over 13 years months behind bars for a Texas oil and gas Ponzi scam that raised about $4.5M from investors. William Risinger must pay more than $3.7M to those whom he bilked.

Risinger pleaded guilty to criminal charges of money laundering and wire fraud. From 11/10 to 6/14 he stole funds from investors for three gas, oil, and mineral ventures that were scams. Court documents state that he used proceeds from his fraud for his own spending and for ‘lulling” payments to make it appear to investors as if the joint venture they put their money into was running promised.

As part of his sentence, Risinger will spend 160 months in prison and serve three years of supervised release.

Linn Energy Seeks Chapter 11 Bankruptcy Protection
In other oil and gas news, Linn Energy LLC (LINE) has filed for Chapter 11 bankruptcy. The Houston-based company cited weak energy prices as a reason for having to seek protection.

Ex-Deutsche Bank Broker Found Guilty for Insider Trading Related to Operation Tabernula Probe

Published on: May 10, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Martyn Dodgson, a former Deutsche Bank AG (DB) broker and managing director, and Andrew Hind, an accountant, were convicted of insider trading in London. The Financial Conduct Authority said that that Dodgson and another broker gave insider information about certain business deals to Hind, who then passed on the information to two other traders. They allegedly made $10.7M from trading half a dozen stocks in what is being called the largest insider trading case in the U.K.

The probe into the insider trading allegations, known as Operation Tabernula, has been going on for nine years. Already, three other convictions have been rendered related to the investigation. According to prosecutors, those involved employed conventional techniques and modern technology to conceal their trades. For example, they would meet at Indian restaurants where they’d hand over money in envelopes. They also purportedly used pay-as-you-go phones and encrypted memory sticks.

After investigators planted a bug in the office of day trader Benjamin Anderson, a conversation was recorded involving Iraj Parvizi, another day trader, in which Dodgson was described. Anderson and Parvizi, who were both acquitted of criminal charges, claimed that they had no reason to believe that the tips they were receiving was insider information.

It was in 2014 that former Moore Capital Management LLC trader Julian Rifat pleaded guilty to insider trading in an offshoot probe of this investigation. He admitted to sharing insider information that he received while employed at the firm to associate Graeme Shelley, who then traded to benefit the two of them. Shelley, who was formerly with Novum Securities, also pleaded guilty to insider dealing with Rifat and associate Paul Milsom, who entered his own guilty plea.

NY City Council Speaker Wants SEC to Investigate Oppenheimer Funds Over Puerto Rico Debt Crisis

Published on: May 9, 2016 | by Shepherd Smith Edwards & Kantas, LLP

According to InvestmentNews, New York City Council Speaker Melissa Mark-Viverito is asking the U.S. Securities and Exchange Commission (“SEC”) to conduct a probe into OppenheimerFunds, Inc. (“OPY”) and its impact on Puerto Rico’s financial woes. Speaker Mark-Viverito believes that the asset-management company played a part in making Puerto Rico’s financial crisis worse by investing even more in the island’s debt. She claims that just in the last eight months, OppenheimerFunds has added $500 million to investments it made in Puerto Rican debt.

Right now, the U.S. territory owes over $70 billion in debt, which it is struggling to pay. It recently defaulted on over $370 million of a bond payment that was due this month. Another $2 billion is due in July, including around $700 million in general obligation debt.

To satisfy investor redemptions, OppenheimerFunds has sold its non-Puerto Rico bonds, which would have raised the current allocation of the asset manager’s funds to the Commonwealth. In a letter to the SEC, Mark-Viverito, who was born in Puerto Rico, urged the agency to look into whether Oppenheimer has complied with all regulations and securities laws when handling its Puerto Rican bond investments. She believes banks, hedge funds, and other investors in the territory’s general-obligation bonds and utility debt are to blame for the island’s financial woes.

Four Credit Suisse Bankers Accused of Unauthorized Trading in Rich Clients’ Accounts, Bank of America Settles Mortgage Case for $190M, and Goldman Sachs to Pay Illinois Pension Fund $272M

Published on: May 7, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Bank of America to Pay Federal Home Loan Bank of Seattle $190M
Bank of America Corp. will pay $190M to resolve mortgage-backed securities fraud charges brought by the Federal Home Loan Bank of Seattle. The SEC filing stated that the settlement was reached last month and that most of it was previously accrued. The lawsuit alleged misstatements and omissions during the issuance of MBSs.

It was just earlier this year that Bank of America’s Merrill Lynch and 10 other banks agreed to pay over $63M to resolve accusations that they misrepresented residential mortgage-backed securities to the Virginia Retirement System and the state of Virginia.

Judge Approves $270M Mortgage-Backed Securities Fraud Settlement Involving Goldman Sachs
A federal judge has approved the proposed settlement between Goldman Sachs (GS) and lead plaintiff NECA-IBEW Health & Welfare Fund, as well as 400 bondholders and another electrical union pension fund. The Illinois pension fund for electrical workers brought the case in 2008, accusing the firm of leaving out key information and making false statements about the mortgages it sold into 17 trusts the year before.

Hedge Funds Continue to See Investor Exodus

Published on: May 6, 2016 | by Shepherd Smith Edwards & Kantas, LLP

According to Bloomberg, in the last two quarters, investors have withdrawn nearly $17M from hedge funds—that’s more money than what they invested in the funds. They’re also calling on struggling funds to reduce the fees of 2% of assets and 20% of profits that they’re usually charged. The reason for their actions is that hedge funds haven’t been doing so well lately as they’ve failed to keep up in the bull market.

Hedge fund-related losses were $537M in the first quarter. That’s a significant decline from last year’s first quarter which saw a $246M profit.

Investors are not alone in their dissatisfaction. Some of the biggest financial players in the world haven’t had the kindest words to say about the funds.

Just this April, billionaire Warren Buffet told investors at the yearly Berkshire Hathaway shareholder meeting to stay away from the hedge funds because of the poor returns and high fees. Speaking at the Milken Institute Global Conference earlier this week, Cohen spoke about what he perceived was a “lack of talent” in the hedge fund industry. Cohen formerly ran SAC Capital Advisors before he was forced to plead guilty to securities fraud.

Deutsche Bank Settles Silver Price Rigging Case

Published on: May 6, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Deutsche Bank AG (DB) has settled a private lawsuit accusing the German bank of manipulating silver futures prices. The terms of the payment amount were not disclosed.

It was in 2014 that silver futures trades sued Deutsche Bank (DB), Bank of Nova Scotia (BNS), and HSBC Holdings Plc (HSBC), accusing the firms of unlawfully manipulating the price of metal and its derivatives. They claimed that the banks, which are the largest silver bullion banks in the world, abused their power so they could dictate the price of silver. The banks would hold secret meetings daily and allegedly manipulate the price so they could illegitimately profit during trading. Meantime, other investors utilizing the silver benchmark in billions of dollars of transactions purportedly were harmed.

Deutsche Bank has admitted to manipulating gold and silver prices. It promised to provide any evidence it might have about other banks’ and their involvement, including electronic communications.

Claims have previously brought against financial firms over alleged gold price rigging. In 2014, Barclays Plc (BARC) was fined $43.8M for internal control failures that let a trader rig gold prices.

MetLife Securities Ordered to Pay $25M FINRA Sanction Related to Variable Annuities

Published on: May 5, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority said that MetLife Securities Inc. (MSI) would pay a $20M fine as well as $5M to customers for negligent and material misrepresentations that it purportedly made related to variable annuity replacement applications. According to the self-regulatory organization, these alleged omissions and misrepresentations were on tens of thousands of applications, and they made each replacement variable annuity seem of greater benefit to the customer despite the fact that the variable annuities that were recommended were usually more costly than the ones that the customers already owned. MetLife Securities made at least $152M in gross dealer commissions over six years through its variable annuity replacement business.

Based on a sample of transactions that were randomly examined, FINRA said that from ’09 through ’14, MetLife Securities omitted or misrepresented at least one material fact connected to the guarantees and costs of existing variable annuity contracts in 72% of the 35,500 replacement applications that it approved. Among the alleged misrepresentations:

· Existing variable were costing customers more than the variable annuities they were recommending, when the opposite was true.

· Customers were not told that the variable annuity replacements promised to them would lessen or get rid of key features that their current variable annuity possessed.

· In disclosures, the value of customers’ existing death benefits was understated.