Investor Lawyers Blog

Ameriprise Financial Must Pay Woman’s Estate Over $2M For Broker Fraud

Published on: January 27, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Arbitration panel says that Ameriprise Financial (AMP) must pay over $2M to the estate of Glenny B. White for losses related to broker fraud committed by an ex-firm broker. The executor of White’s estate claims that Ameriprise Financial Services did not properly supervise former broker Jeffrey Davis.

In 2014, Davis admitted to stealing money from White and other clients. White was his client for almost ten years before she found out in 2013 that he was stealing funds from her. She died at the age of 91 in 2014.

Davis has since been fired from Ameriprise, and FINRA barred him from the brokerage industry. Last year, he was sentenced to over four years in prison after pleading guilty to wire fraud and admitting to stealing almost $200K from clients.

On Finra’s BrokerCheck report about Davis, it is noted that in at least two cases involving Ameriprise clients the firm had reported to the regulator that their funds were misappropriated.
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JPMorgan Chase to Resolve Mortgage Fraud Case by Ambac for $995M

Published on: January 27, 2016 | by Shepherd Smith Edwards & Kantas, LLP

JPMorgan Chase & Co. (JPM) has consented to pay $995M to settle claims brought by Ambac Financial Group claiming that the insurance company was fooled into insuring hundreds of mortgage bonds that were backed by poor quality loans. As part of the settlement, Ambac will withdraw its opposition to a $4.5B deal reached between the firm and investors, such as Pacific Investment Management Co. (PiMCO) and BlackRock Inc (BLK), over faulty home loans.

One of Ambac’s units was the number two largest bond insurer in the world eight years ago, when the growing number of mortgage defaults caused it to become inundated with claims. The settlement with JPMorgan will conclude two lawsuits over the quality of loans backing mortgage bonds that were sold by Bear Stearns & Co., which JPMorgan purchased in 2008. It also resolves the insurer’s efforts to recover payments of principal plus interest on approximately $3.3B of nearly a dozen MBS trusts sponsored by Bear Stearns unit EMC Mortgage LLC.

According to Bloomberg, this latest settlement opens the door for a judge to approve the settlement between JPMorgan and institutional investors.

Citigroup, Morgan Stanley, Goldman Sachs, and Other Big Banks to pay $63M to Virginia to Settle RMBS Fraud Claims

Published on: January 26, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The state of Virginia has arrived at a $63M settlement with 11 banks to resolve claims that they bilked the state’s retirement system by purportedly misrepresenting the quality of residential mortgage-backed securities in the run up to the 2008 financial crisis. The resolution settles all claims against the financial firms accused of causing financial harm to the Virginia Retirement system and its taxpayers and pensioners.

The banks involved will pay the following amounts respectively to settle, including:

· UBS Securities for $850K
· Bank of America’s Merrill Lynch, Pierce, Fenner & Smith, Inc. and Countrywide Securities Corp. (BAC) for $19.5M
· Credit Suisse Securities (CS) for $1.2M
· RBS Securities (RBS) for $10M
· HSBC Securities (HSBC) For $2.5M
· Barclays Capital (BARC) for $9M
· Goldman Sachs & Co. (GS) for $2.9M
· Morgan Stanley & Co. (MS) for $6.9M
· Citigroup Global Markets (C) for $4.8M
· Deutsche Bank Securities (DB) for $5.6M

The state lost $383M over RMBS it purchased from 2004 to before 2010 and it had to sell most of these securities, which were toxic and constructed on junk mortgages. The settlement is the largest non-healthcare related financial recovery in a case involving Virginia Fraud Against Taxpayers Act-related violations. However, according to the state’s Attorney General Mark Herring, even though the firm is settling it is not denying or admitting liability.

UBS Shutters MLPL and MLPV Funds Following Millions of Dollars in Investor Losses

Published on: January 25, 2016 | by Shepherd Smith Edwards & Kantas, LLP

UBS AG (UBS) is reportedly closing down two of its exchange traded note (ETN) funds that were concentrated in master limited partnerships:

· The $11M ETRACS 2x Monthly Leveraged S&P MLP Index ETN (MLPV), which was just issued last July

· The $113M ETRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN (MLPL)

SEC Wants Lawyer to Pay $2.5M Penalty in Texas Securities Case

Published on: January 23, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. Securities and Exchange Commission has filed a motion for summary judgment in its case against Gregory Jones. The Texas lawyer is facing civil charges accusing him of defrauding investors in two securities offerings, including a fracking water filtration deal and an oil and gas exploration venture.

Now, the SEC wants Jones to pay a $2.5M civil penalty, disgorgement of $985K, further disgorgement of $480K, and $17K in prejudgment interest.

The regulator, in its original complaint that it submitted last year, claims that Jones represented Swiss and French investors who invested about $6M in Edwards Exploration. The attorney had a deal with the company in which he would get paid for providing due diligence related to the investors’ shares. The fees he received under the agreement were about $480K. However, claims the Commission, Jones did not tell investors that the money came from their principal cash.

The SEC also says that from ’13 through at least ’14, Jones sold and offered securities that were put out by Aquaphex, which was supposedly a business that was involved in recycling fracking water. He raised about $64K from nine investors. However, contends the Commission, the investment documents for the company included false statements, including a claim that investors could end up making over 115% a year on the securities the they bought.
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Investors Files Texas Securities Case Alleging Violations by United Development Funding IV

Published on: January 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Investors have filed a class action securities case claiming that the Texas nontraded real estate investment trust United Development Funding IV (NASDAQ:UDF) and certain of its officers violated federal securities laws. The complaint come a month after the Harvest Exchange website published a report accusing the Company of running a Ponzi-like scam. The UDF umbrella is accused of raising capital to bail out its earlier vintage entities.

On December 10, 2015, the day that the report went out, UDF’s shares dropped significantly. The Company then put out a press release disclosing that its UDF IV and UDF III have been cooperating for nearly two years with the U.S. Securities and Exchange Commission, which has been conducting a non-public probe since early 2014. Following that announcement, Company shares fell even further, negatively impacting investors.

The Texas securities case accuses the defendants of, from June 4 – December 10, 2015, failing to disclose that:

· New UDF companies gave older UDF companies substantial liquidity, letting them pay earlier investors.
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Banks Work To Settle Libor Rigging Probe With Switzerland

Published on: January 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Bloomberg says that according two sources, at least six banks are working to resolve a Swiss probe into Libor rigging allegations. COMCO, the competition regulator in Switzerland, is reportedly looking to conclude its probe by July. It has been looking into possible collusion by traders to manipulate the London Interbank Offered Rate and the Tibor, Libor’s Japanese counterpart.

While the names of the firms that COMCO hopes to conclude its probe with have not been disclosed, a dozen banks were originally named at the start of its investigation in 2012, including Deutsche Bank (DB), UBS (UBS), HSBC (HSBC), Royal Bank of Scotland Group Plc (RBS), and Credit Suisse (CS). UBS, which is a Swiss bank, was granted limited immunity, however, because it was the first to step forward and assist in the Libor rigging investigation.

The maximum that Comco is allowed to impose in cases like this one is 10% of a Company’s revenue in Switzerland over the past three years in the area under investigation. Already, some of the firms mentioned in this probe have settled investigations with regulators in the U.K. and the U.S. for about $9 billion. And there are other probes still. Comco continues to look into allegations of Forex manipulation.

In other Libor rigging news, two ex-Rabobank (RABO) traders are trying to get a federal judge in the U.S. to toss out their convictions for manipulating the interest benchmark.

FGIC Sues Puerto Rico Over Bond Payment Default

Published on: January 21, 2016 | by Shepherd Smith Edwards & Kantas, LLP

A third bond insurer is now suing Puerto Rico over the way its government officials diverted tax money to fulfill certain bond payments that were due while defaulting on other payments. The latest plaintiff is Financial Guaranty Insurance Company (FGIC). Its complaint has been consolidated with a lawsuit brought by Ambac Assurance Corporation (Ambac) and Assured Guaranty Corp. (Assured) that makes similar allegations.

FGIC contends that government officials violated the U.S. Constitution when they diverted over $164 million to pay off some of the Commonwealth’s general obligation debt. As a result of the diversion, Puerto Rico defaulted on $37 million in interest on bonds and FGIC says that because of this it had to pay over $6 million in claims.

The fund diversion lets the territory avoid default on general obligation bonds, which, under its own Constitution, are the priority in terms of making payments. However, according to the three insurance companies, the island expects to make about $9 billion in the fiscal year that ends in June and this goes beyond its debt-service costs. The insurance companies do not believe that money had to be redirected away from the government agencies.

Puerto Rico owes over $70 billion in debt. Recently, U.S. Treasury Secretary Jack Lew pressed Congress to pass legislation to help the beleaguered territory. Lew visited the island on Wednesday.
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Securities News: Alternative Fund Manager Accused of Misleading Investors, Futures Trader Goes to Jail for Fraud, Ex-NBA Player Gets Sentence for Ponzi Scam, and 9th Circuit Upholds Investment Manager’s Conviction

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

Equinox Fund Management Resolves SEC Charges For Over $5.8M
A Denver-based alternative fund manager has consented to settle Securities and Exchange Commission charges accusing it of misleading investors about the way certain assets were valued and for overcharging management fees. According to the regulator, Equinox Fund Management LLC determined its management fees differently from the method it described in registration statements for The Frontier Fund, which is a managed futures fund.

Although registration statements said that management fees would be calculated based on each series’ net asset value, Equinox used the assets’ national trading value instead. Also, the firm is accused of straying from the valuation methodology it had disclosed for certain holdings.

The fund manager will pay back investors about $5.4M in excessive management fees that it was paid over seven years, in addition to $600K in prejudgment interest. It also will pay a $400K penalty.

Futures Trader Goes to Jail, Pays Restitution for Securities Fraud
RXM Holdings Ltd. futures trading director Robert Scott Wiens is sentenced to one year in prison after pleading guilty to securities fraudhttps://www.investorlawyers.com/legal-news. He also will pay $260k in restitution to investors he harmed.

Wiens was an unlicensed securities professional in 2010 and 2011. He sold fraudulent investments, which he traded on the futures market.

Wiens directed investors to open bank accounts under RXM’s name for their funds. He told them that there was zero risk and returns were guaranteed. He then used the money in the accounts to pay off earlier investments and cover his own spending.
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Securities Fraud Headlines: Ne-Yo Sues Citibank, SEC Awards Whistleblower $700K, U.S. Supreme Court Takes on Insider Trading, and Morgan Stanley Must Deal with $500M CDO Case

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

Performer Ne-Yo Files Countersuit Against Citibank Over Alleged $5.4M Securities Fraud
Singer Ne-Yo is suing Citibank (C), claiming that the financial institution should have had the proper safeguards and procedures in place that could have prevented his ex-money manager Kevin Foster from allegedly bilking him of $4.5M. The performer had filed a securities case against Foster and the latter’s employer, V. Brown & Co., in 2014.

Ne-Yo sought $8M. $4.5M of which Foster had purportedly swindled by moving funds out of the singer’s accounts to the money manager’s own accounts and the accounts of others. Ne-Yo sought $3.5M for service payments he says that he paid Foster and V. Brown between ’05 and ’13.

The performer claims that Foster forged his name on loan documents and took the money, including $1.4M from Citibank that the singer claims he never signed off on. Right before Ne-Yo sued his ex-manager, however, Citi filed its own lawsuit against him for the loan.

Now, Ne-Yo is saying that Citibank never told him of the numerous transactions made by Kevin, some of which involved his overdrawn account at the bank.

Sec Issues Over $700K Award to Whistleblower
The Securities and Exchange Commission is issuing an over $700K award to an individual who blew the whistle on a company. The information that the person provided led to a successful enforcement action. The whistleblower, an industry expert, was not employed at the company. This is the first time a company outsider has been issued this type of award since the SEC opened its whistleblower office in 2011.

Because the regulator protects the confidentiality of whistleblowers, the individual’s identity has not been revealed. SEC Enforcement Division Director Andrew Ceresney said that the agency values voluntary submissions by industry experts with ‘first-hand” information of wrongdoing committed by company insiders.”