The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
March 28, 2019
Federal Grand Jury Returns Indictment in $300 Million Nationwide Investment Fraud and Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-sc/pr/federal-grand-jury-returns-indictment-300-million-nationwide-investment-fraud-and-ponzi
In an Indictment filed in the United States District Court for the District of South Carolina, https://www.justice.gov/usao-sc/press-release/file/1148576/download, Scott A. Kohn
and Future Income Payments, LLC (FIP) were charged with conspiracy to engage in mail and wire fraud. As set forth in part in the DOJ Release:
[F]IP operated a Ponzi scheme in which it actively recruited pension holders who were desperate for money, including many veterans of the United States Armed Forces. The pensioners made monthly payments to FIP in exchange for a lump sum payment or loan. The adjusted annual percentage rate on these transactions often exceeded 100%.FIP then solicited investors to purchase "structured cash flows," which were the pensioners' monthly pension payments. FIP promised the investors a rate of return between 6.5% and 8%. It took active steps to conceal from the investors the usurious nature of its transactions with the pension holders. FIP diverted new investor funds flowing into the business to fund payments to earlier investors in order to keep the scheme operational. When FIP ceased doing business in early 2018, investors were owed approximately $300 million. The scheme alleged in the Indictment victimized over 2,600 individuals.
Virginia Man Pleads Guilty To Defrauding Investors Of $2 Million In Iraqi Dinar Fraud Scheme (DOJ Release)
https://www.justice.gov/usao-sdny/pr/virginia-man-pleads-guilty-defrauding-investors-2-million-iraqi-dinar-fraud-scheme
https://www.justice.gov/usao-sdny/pr/virginia-man-pleads-guilty-defrauding-investors-2-million-iraqi-dinar-fraud-scheme
William Burank pled guilty in the United States District Court for the Southern District of New York to one count of wire fraud arising from his role in an Iraqi Dinar scam. As set forth in part in the DOJ Release:
From February 2010 through June 2018, BURBANK engaged in a Ponzi-like scheme to defraud more than 150 individual investors, including many U.S. military veterans and their families, of $2 million by soliciting funds through false and fraudulent pretenses. Specifically, BURBANK falsely claimed to potential investors that their funds would be used to trade in off-exchange foreign currency, namely, to purchase quantities of the Iraqi dinar, through an Iraqi bank headquartered in Bagdad. In truth and in fact, upon receiving investor funds, BURBANK used those funds to trade in his own brokerage accounts, to make payments to earlier investors, and for his personal expenses, among other things. Additionally, during the course of his scheme, BURBANK hid from investors the fact that he had misappropriated and lost their funds. In order to conceal the truth from investors, BURBANK provided them false information regarding the status of their investment, and engaged in a Ponzi-like scheme in which he used money obtained from new investors to make redemption payments to previous investors.
GUEST BLOG: Bitwise and Fund-Foolish by Aegis Frumento Esq
(BrokeAndBroker.com Blog)
(BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4497/aegis-frumento-bitwise/
The Winklevoss twins and Bitwise proposed ETFs that holds only bitcoins. That raises an interesting question: If the markets in bitcoins are "orderly and efficient," then why wouldn't you simply buy bitcoins on one of those 10 "real" markets? Perhaps you don't really believe that those markets are truly orderly and efficient; and, if that's the case, then you may want an intermediary to hold liable. All of which may be a reason for not directly investing in bitcoins, but it's not why ETF's were made -- and it certainly doesn't justify a single cryptocurrency ETF.
The Winklevoss twins and Bitwise proposed ETFs that holds only bitcoins. That raises an interesting question: If the markets in bitcoins are "orderly and efficient," then why wouldn't you simply buy bitcoins on one of those 10 "real" markets? Perhaps you don't really believe that those markets are truly orderly and efficient; and, if that's the case, then you may want an intermediary to hold liable. All of which may be a reason for not directly investing in bitcoins, but it's not why ETF's were made -- and it certainly doesn't justify a single cryptocurrency ETF.
(DOJ Release)
https://www.justice.gov/usao-mt/pr/bozeman-woman-admits-using-money-management-service-defraud-court-appointed-clients
Ellen Lorraine Van Ausdol pled guilty in the United States District Court for the District of Montana to wire fraud and to making and subscribing to a false income tax return. Van Ausdol operated a fiduciary business, called Fiduciary Consulting and Management, which provided money management services for court-appointed clients, many of whom have mental deficiencies and lacked the ability to manage their own money. Starting around 2010 and running into April 2016, Van Ausdol allegedly used the majority of the money earmarked for her fiduciary management to cover her gambling. Further, her alleged theft resulted in her owing the IRS additional income tax for the six-year period. DOJ alleges that the fraud loss is $444,000 and the income tax loss is $52,894.
FINRA Arbitrator Mutually Separates Rep From Former Firm. In the Matter of the Arbitration Between Anthony Michael Gambone, Claimant, v. Pruco Securities, LLC, Respondent (FINRA Arbitraiton Decision 18-03361)
http://www.finra.org/sites/default/files/aao_documents/18-03361.pdf
http://www.finra.org/sites/default/files/aao_documents/18-03361.pdf
In a FINRA Arbitration Statement of Claim filed in September 2018, associated person Claimant Gambone representing himself pro se sought the expungment of the the reasons for and the nature of his termination by Respondent Pruco. In recommending the requested relief, the sole FINRA Arbitrator recommended that the Reason for Termination be revised to "Other" and that the Termination Explanation should state: "Mutual Separation Occurred." I note this matter solely in admiration for the clever turn of the phrase: Mutual Separation Occurred." What, might I ask, involves a mutual separation? Is that akin to a "Permitted to Resign" or is it more like what happens an hour or so after you vigorously shake a cruet filled with vinegar and oil and the two liquids mutually separate? Along those lines, did Gambone rise to the top like cream while his former employer mutually separated from him as whey? Obviously, once my imagination gets going, there's no telling the flights of fantasy that it produces.
FINRA Pro Se Arbitration Alleges Outright Ignorance of Claimant's Attempt to Amicably Resolve the Dispute. In the Matter of the Arbitration Between Arthur Lawrence Dinkin, Claimant, v. Broker Dealer Financial Services Corp., Robert Donald
Sherwood, Thomas Edward Sherzan, and Lisa Marie Smith, Respondents (FINRA Arbitration Decision 18-02971)
http://www.finra.org/sites/default/files/aao_documents/18-02971.pdf
In a FINRA Arbitration Statement of Claim filed in August 2018, associated person Claimant Dinkin representing himself pro se asserted (as set forth in the FINRA Arbitration Decision):
deception regarding the optional technology program; delay or outright ignorance of Claimant's attempts to amicably resolve this dispute; failure to adhere to the terms of the Registered Representative Independent Contractor Agreement between Claimant and Respondent BDFSC; and failure to pay all compensation earned by Claimant. The causes of action relate to Claimant's resignation of employment from Respondent.
Respondent BDFSC filed a Counterclaim asserting failure to repay sums due arising from alleged $1,087.03 in overpayments made to Claimant after his resignation. It is unclear what, if anything, the other Respondents did or didn't do in their pro se capacities at this arbitration. Regardless, the sole FINRA Arbitrator found Respondent BDFSC liable and ordered the firm to pay to Claimant Dinkin $644.84 in compensatory damages; and the firm is assessed the entire $300 paper decision fee plus it will reimburse Claimant the amount of $250.00 for his FINRA filing fee.$234.77 for Errors & Omissions insurance erroneously charged in September 2017; $3,150.00 for technology fees charged from January 2017 through September 2017 in violation of Section 9 of the Registered Representative Independent Contractor Agreement; $307.13 for the compensation error between Respondent BDFSC's compensation periods 1718 and 1719; $294.84 for compensation errors discovered by Respondent Robert Sherwood; $450.00 for legal fees associated with correspondence from Claimant's attorney; and $5,000.00 for punitive damages.