Securities Cases: Anti-Money Laundering Violation Allegations Lead to $5.3M Fine Against ICFBCFS, Three Houston-Based Healthcare Executives are Accused of Falsifying Financial Information, and Pension Fund Accuses Wells Fargo of Holding Back Rebate Fees

ICFBCFS and Chardan Capital Markets Accused of Anti-Money Laundering

FINRA has fined the Industrial and Commercial Bank of China Financial Services LLC (ICBCFS) $5.3M for “systemic anti-money laundering compliance failures.”  The self-regulatory organization contends that when clearing and settling the liquidation of over 33 billion penny stock shares between 1/2013 and 9/2015, the firm did not have in place an anti-money laundering program that was reasonable enough to identify and report possibly suspect transactions, especially when penny stocks were involved.  ICBCFS is settling the case without denying or admitting to the self-regulatory authority’s findings. It has, however, consented to an entry of the findings.

ICBCFS also agreed to pay an $860K penalty to settle a US Securities and Exchange Commission case alleging anti-money laundering violations and the failure to report billions of suspect penny stock sales.

It is the job of brokerage firms to submit Suspicious Activity Reports (SARs) when there are transactions that either look like fraud or appear to have no legal purpose involved. The regulator claims that when introducing broker Chardan Capital Markets  LLC liquidated over 12B penny stock shares for seven customers, ICBCFS cleared the transactions. The SEC found that the two firms did not submit any SARs despite there having been red flags.

ICBCFS and Chardan are settling the SEC charges without denying or admitting to the findings, and Chardan will pay a $1M penalty. Chardan AML officer Jerard Basmagy, whom the SEC is accusing of aiding, abetting, and causing the violations by his firm, will pay $15K. He is barred from penny stocks and the securities industry for at least three years.

Ex-Constellation Healthcare Technologies Executives Accused of Falsifying Information

Three executives of a Houston-based company are accused of fraud. According to the SEC, Constellation Healthcare Technologies Inc. CEO Parmjit Parmar, ex-CFO Sotirios Zaharis, and ex-secretary Ravi Chivukula falsified certain information that they gave to a private firm when negotiating the latter’s acquisition of a stake in the company.

The regulator contends that they persuaded the private firm to acquire a majority of Constellation shares and they allegedly did this issuing fake information, including that three fictitious subsidiaries had been acquired for over $62M. The fake acquisitions were purportedly funded via stock sales, with the proceeds later diverted to them.

Meantime, federal prosecutors have filed criminal charges against the three men.

Wells Fargo Named in Whistleblower Lawsuit  by Pension Fund

The Chattanooga Fire and Police Pension Fund are accusing Wells Fargo (WFC), a fund trustee, of acting erroneously by keeping the fee rebates of mutual fund fees that should have been issued to the pension fund. The Financial services company has admitted that a mistake was made, which caused the revenue share rebates not to be paid. About $15K was improperly held back. However, according to Wells Fargo, that amount has since been restored to the pension plan.

The Chattanooga Fire and Police Pension Fund had filed a whistleblower case with the US Securities and Exchange Commission over this matter. According to the fund’s board of directors Facebook page, the fund has been looking into possible fraud and overcharging by Wells Fargo. The statement alleges “undisclosed revenue sharing, systemic errors, and incomplete records.”

If you are a pension fund that suspects that your investment losses may be due to fraud, negligence, or wrongdoing, contact our institutional investor fraud lawyers at Shepherd Smith Edwards and Kantas, LLP today. We help investors recover their losses caused by pension fund fraud.

The SEC Order in the ICBCFS Case (PDF)

The SEC Order in the Chardan Case (PDF)

The SEC Complaint in the Constellation Healthcare Technologies Case (PDF)

Chattanooga’s Fire and Police Fund Sues Wells Fargo (PDF)

More Blog Posts from SSEK Law Firm: 

Proposed Tax Ruling Could Bar Oil and Gas Pipelines from Structuring as Master Limited Partnerships, April 13, 2018

Firm Executives Reportedly Were Aware of Domestic Violence Allegations Against High-Earning Morgan Stanley Broker for Years, Stockbroker Fraud Blog, April 12, 2018

SEC Accuses Broker of Giving Some Customers Preferential IPO Access in Exchange for Over $1M in Kickbacks, Stockbroker Fraud Blog, January 2, 2018


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