Securities Industry Commentator by Bill Singer Esq

Each year, an estimated 50 percent of people are victims of financial fraud, according to a study from the Stanford Center on Longevity and the FINRA Investor Education Foundation. While that includes all sorts of scams and schemes, 16.5 percent of people surveyed for the research reported being a victim of investment fraud.

On November 9, 2018, Claimant filed a Motion for Orders of Production and Sanctions against Respondent, based on Respondent's alleged failure to comply with Claimant's discovery request. On November 19, 2018, Respondent filed its opposition to the motion. On November 26, 2018, Claimant filed his reply. On November 30, 2018, Respondent filed an additional submission in relation to the motion. By Order dated December 3, 2018, the Arbitrator rejected Respondent's additional submission as it was "beyond the allowed responses. Respondent had the opportunity to file an opposition, and did so. A further response after Claimant's Reply to its opposition is not permitted."

By Order dated December 6, 2018, the Arbitrator requested Respondent provide the following additional information by January 11, 2019, to assist her in deliberating the motion: 1) applicability of 17 CFR 1.35 (a)(iii) to Respondent, and Respondent's policy on recording of telephone conversations that lead to a trade, and its policy of recording telephone calls in general; 2) a copy of Respondent's Securities Customer Agreement; and 3) an explanation of how electronic future trades are placed on Respondent's futures platform with any manuals, or instructions on how to place a trade that are available to customers placing future trades. On January 11, 2019, Respondent provided the requested additional information.

In its complaint, the SEC alleges that broker-dealer Spartan Securities Group, Ltd. and transfer agent Island Capital Management LLC, which does business as Island Stock Transfer, helped create and sell at least 19 purportedly legitimate public companies that were in fact shams. To effectuate the scheme, the complaint alleges that Spartan Securities filed fraudulent applications with Financial Industry Regulatory Authority (FINRA) to publicly list the companies' common stock and ultimately enable the shares to become free-trading and available to public investors. The complaint also alleges that Spartan Securities' principals, Carl E. Dilley and Micah J. Eldred, signed the false applications even though they knew or at least were reckless that the companies were fake and David D. Lopez failed to investigate red flags raised by FINRA or even familiarize himself with the companies. The SEC further alleges that Island Stock Transfer and Dilley facilitated the public sale of the stock of at least 12 of the sham companies through the bulk issuance and transfer of the "free-trading" securities.

[O]n September 29, 2016, Vacante learned that the FDA had recommended that Trinity withdraw two products which Vacante believed represented the future of the company. The complaint further alleges that, that same day, Vacante twice communicated with his broker in efforts to sell Trinity American Depository Receipts (ADRs) which he had received as part of his employment, including lowering the price to ensure the sale occurred. On October 4, 2016, Trinity announced that it was withdrawing the two products from FDA consideration. At the close of trading that day, Trinity's ADRs closed more than 50% lower than the prior day's closing price. The SEC alleges that, by selling his ADRs before Trinity's announcement, Vacante avoided a loss of over $70,000.

Lawful Permanent Resident

Any person not a citizen of the United States who is living in the U.S. under legally recognized and lawfully recorded permanent residence as an immigrant. Also known as "permanent resident alien," "resident alien permit holder," and "Green Card holder."

Permanent residents are also commonly referred to as immigrants; however, the Immigration and Nationality Act (INA) broadly defines an immigrant as any alien in the United States, except one legally admitted under specific nonimmigrant categories (INA section 101(a)(15)). An illegal alien who entered the United States without inspection, for example, would be strictly defined as an immigrant under the INA but is not a permanent resident alien. Lawful permanent residents are legally accorded the privilege of residing permanently in the United States. They may be issued immigrant visas by the Department of State overseas or adjusted to permanent resident status by U.S. Citizenship and Immigration Services in the United States.

[O]n Jan. 25, 2019, Gallegos attempted to exit the United States via vehicle at the Hidalgo Port of Entry. Customs and Border Protections Officers (CBP) conducted an outbound inspection which allegedly led to the discovery of approximately $1,081,375.00 in bulk U.S. currency concealed in a speaker box in the trunk of the vehicle.

The charges allege Gallegos was aware of the currency in the vehicle but not the total amount. He allegedly planned to smuggle the currency for others in return for $1000.

It is not a crime to carry more than $10,000, but it is a federal offense not to declare currency or monetary instruments totaling $10,000 or more to a CBP officer upon entry or exit from the U.S. or to conceal it with intent to evade reporting requirements.

If convicted, Gallegos faces up to five years in federal prison along with a possible $250,000 fine. Gallegos could also lose his status as an LPR. . . .

• Securities Industry Commentator
• Bill Singer