Investor Lawyers Blog

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.
Continue Reading ›

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.
Continue Reading ›

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.”

SEC Sues Ex-Superior Bank Executives and Board Members

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

The U.S. Securities and Exchange Commission has filed a lawsuit against eleven ex-Superior Bank executives and board members. The regulator says that the bankers took part in numerous scams to hide just how bad the loan losses were at the bank after the financial crisis struck. Nine of the individuals have consented to settle the SEC’s charges.

The SEC is accusing the directors and officers of purposely misleading regulators and investors by using fake appraisals, straw borrowers, and insider deals to make the bank’s financial health seem more robust than what was actual. Bank officials are accused of improperly renewing, extending, and rolling over loans that were bad, in part to avoid having to report loan and lease losses.

Because of this, Superior Bank overstated its net income by 99% in public filings for 2009 and by 50% in 2010. The bank failed in 2011 and the Office of Thrift Supervision closed it last year. The Federal Deposit Insurance Corporation was appointed as its receiver.

State Street To Pay $12M To Resolve Pay-to-Play Scam Charges Involving Ohio Pension Funds

Published on: January 16, 2016 | by Shepherd Smith Edwards & Kantas, LLP

The SEC said that State Street Bank and Trust Company will pay $12M to resolve civil charges accusing the firm of involvement in a pay-to-play scam. The regulator is accusing State Street of trying to gain contracts so it could do business with Ohio pension funds.

Vincent Debaggis, who helmed the public funds group of State Street Corp., is accused of entering into a deal with the deputy treasurer of Ohio. The arrangement allegedly included both illicit payments and political campaign contributions. In return for the money, State Street is accused of obtaining sub-custodian contracts that involved keeping the investment assets of certain Ohio pension funds safe and effecting the securities transaction settlements of the funds.

DeBaggis and State Street have agreed to the SEC’s order without denying or admitting to the regulator’s findings. The $12M that State Street will pay includes an $8M penalty and $4M in prejudgment interest and disgorgement. Meantime, DeBattis will pay over $174K in disgorgement plus prejudgment interest and a $100K penalty.

Securities Headlines: Ohio Financial Adviser Faces Criminal Charges, Petters Ponzi Scam Investors Still Waiting for Their Money, and FINRA Recommends Disciplinary Action Against Ex-Jefferies Bond Trader

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

Ohio Financial Adviser is Indicted in $15M Securities Fraud
Evolution Partners Wealth Management owner Larry Werbel has been indicted on criminal charges accusing him of involvement in a securities scam to bilk at least 100 investor of over $15M. Werbel recruited investors for shares of VgTel Inc. He and other brokers purportedly promised high dividends even though the shares were sold and purchased by companies belonging to the alleged scammers so that they could artificially inflate the share price.

According to prosecutors, over $9M of investor funds were pockets by the fraudsters. Werbel, who prosecutors say got investors to purchase $3M in VgTel shares, received over $300K in kickbacks.

He is charged with securities fraud, conspiracy to commit securities fraud and wire fraud, investment adviser fraud, wire fraud, and making false statements to federal officers. Werbel claims he is innocent.

Meantime, the man accused of masterminding the securities scam, Edward Durante, was arrested in Germany and brought back to the US last month. He previously was convicted of securities fraud in 2011. The U.S. Securities and Exchange Commission has filed a civil case against Evolution Partners, Durante, and others.
Continue Reading ›

Goldman Sachs to Pay $5.1B in Mortgage-Backed Securities Investigation, $15M Over Purported Improper Securities Lending Practices

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

Goldman Sachs Group Inc. (GS) has consented to pay approximately $5.1B to resolve a government investigation into the way it dealt with mortgage-backed securities leading up to the 2008 financial crisis. The settlement was reached in principal with the Residential Mortgage-Backed Securities Working Group of the U.S. Financial Fraud Enforcement Task Force. It must be finalized, still, with definitive documentation to be agreed upon by the parties involved.

The settlement resolves potential and current claims made by attorneys general in Illinois and New York, the US Justice Department, Federal Home Loan Banks of Chicago and Seattle, and the National Credit Union Administration. Goldman is accused of packaging mortgage securities it knew would do badly and selling them off to investors. At issue are the bank’s underwriting, securitization, and sale of bonds from ’05 to ’07.

As part of the settlement, Goldman will pay a $2.39B civil penalty, $1.8B in consumer relief, and $875 million in cash payments. The consumer relief includes loan forgiveness for beleaguered borrowers and homeowners, affordable housing support, construction financing, debt restructuring support, improvement programs related to housing quality, and foreclosure prevention.

FINRA Files Securities Case Against Texas Firm Over Churning Allegations

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

The Financial Industry Regulatory Authority claims that Caldwell International Securities Corp. engaged in the churning of customer accounts and that this purportedly resulted in $1 million in excess commissions for the firm. The self-regulatory organization says that the alleged violations began in 2011.

According to FINRA, the Texas-based company’s founder Greg Caldwell and supervisors Lennie Freiman and Paul Jacobs decided to ignore that four OSJs (offices of supervisory jurisdiction), three in New York and one in New Jersey, were churning customer accounts and making yearly commission revenues of at least 100% of the customers’ equity.

The regulator said that brokers at the OSJs contacted foreign investors to persuade them to take part in speculative stock and option trading. Even after 15 customers lost $1.1M and paid over $1M in commissions and fees, Caldwell and its supervisors purportedly still did not take any action.

Cost-to-equity ratios in customer accounts are believed to have varied from 18% to over 100%. The firm is also accused of not reporting that it had been the subject over three dozen customer complaints.
Continue Reading ›

Closing Arguments in UK Libor Trial Against Ex-RP Martin, Tullet Prebon, and Icap Brokers

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

Wrapping up its case, the UK’s Serious Fraud Office accused former ICAP (IAP) brokers Danny Wilkinson, Darrell Read, and Colin Goodman, ex-Tullet Prebon employee Noel Cryan, and ex-RP Martin brokers Terry Farr and James Gilmour of behaving like a “well-oiled machine” as they allegedly helped former Citi (C) and UBS (UBS) trader Tom Hayes manipulate the London interbank offered rate (Libor). The office’s lawyer said that the six men are guilty of conspiracy to defraud.

In addition to purportedly assisting Hayes to Libor’s yen variant by deceiving clients about the market’s conditions, the men are also accused of trying to convince traders at other banks to submit false Libor rates. The prosecution has said that for the ex-brokers alleged wrongdoing, they received hundreds of thousands of pounds in kickbacks. The SFO said that the former traders agreed to to try to manipulate Libor in return for “wash trades,” which are transactions intended to make it look as if a sale and purchase have happened even though there has been no change in ownership.

All of the men have pleaded not guilty, with five of them maintaining that they were never involved in the Libor rigging scam at all. Ex-RP Martin trader Terry Farr is the only one who has admitted that he tried to help Hayes. However, his defense team argued that Farr was not aware that his actions were wrong because he only had a basic understanding of the finance industry and didn’t understand derivatives. Also, Cryan said that he lied when he told Hayes he was helping him manipulate Libor. He claims that he never actually engaged in the wrongdoing alleged. Hayes, who recently succeeded in getting his 14-year prison sentence reduced to 11 years following an appeal, made over $300M for his former employers by rigging Libor.