The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

May 11, 2020










https://www.justice.gov/usao-cdca/pr/santa-monica-man-admits-orchestrating-online-romance-scam-conned-four-women-investing
I could tell this story in somewhat bland, legal prose but -- hey, sometimes ya just gotta let the tale unravel in all its glory. So, in that spirit, join me as we meet Dr. Tony Mariot and the equally intriguing Brice Carrington. Imagine that between May 2015 and October 2018 you were wiling away your time on dating apps.; and, at some point, your online surfing brought you to Dr. Mariot or Mr. Carrington. After some back-and-forth, you found the men charming, and they reached out to you without much prodding seeking a romantic relationship. Frankly, their overtures would have been hard to resist. After all, each man was a Navy Seal, a graduate of the famed Oxford University, and a professor at UCLA teaching biblical antiquities. Indiana Jones anyone? Turns out that the fabulous Dr. Mariot or Mr. Carington owned Ultimate FX, a sound design company, and 2nd Life, a software business providing animated instruction on how to apply for government benefits. 

Oh . . . you're interested in learning more about my companies? Just between us, the ABC television network and EA Sports video game developer are using Ultimate FX for their shows and games. Also, I'm going to whisper some names into your ear -- those folks just valued 2nd Life at more than $30 million and wanted to invest in the company, but, you never heard that from me, right? 

When the fish bit and the hook was set, the women had invested about $387,000.

Now for reality. Dr. Mariot? Mr. Carington? Oh, they were both the same 57-year-old scamster: Antonio Mariot Wilson. Masquerading to different women as one of his other two alter egos, Wilson took their investments and paid his own personal expenses -- all the while never mentioning a word about the four years he served in federal prison after pleading guilty in  the United States District Court fo the Northern District of California in 2009 to wire fraud and tax evasion charges. Alas, we now come to the present day, in May 2020, when the real Mr. Wilson pled guilty in the United States District Court Central District of California to one count of wire fraud. 

For another variation on Mr. Wilson's romance frauds, and a much fuller expose of his criminal history, READ: 

https://thejasminebrand.com/2017/07/26/exclusive-black-ish-star-jenifer-lewis-scores-settlement-w-la-fitness-over-ex-lover-who-conned-her-out-of/

http://brokeandbroker.com/PDF/LewisCompCASupCt170106.pdf

FAKE FOOTBALL PRO LOVES AND LEAVES - THE BILLS (Orlando Sentinel, May 25, 1989)
https://www.orlandosentinel.com/news/os-xpm-1989-05-25-8905250097-story.html



As set forth under the heading "Introduction and Procedural History" [Ed: footnotes omitted]:

On September 9, 2019, MEMX LLC ("MEMX'"or "Exchange") filed with the Securities and Exchange Commission ("Commission") a Form 1 application under the Securities Exchange Act of 1934 ("Act"), seeking registration as a national securities exchange under Section 6 of the Act. On October 23, 2019, MEMX submitted Amendment No. 1 to the application. Notice of the application, as amended, was published for comment in the Federal Register on November 6, 2019. In a letter dated January 31, 2020, MEMX consented to an extension of time for up to an additional 30 days from the date of publication of notice of its Form 1 application. On February 26, 2020, MEMX submitted Amendment No. 2 to the application  On March 3, 2020, MEMX consented to another 30-day extension of time. The Commission received three comments on the application, along with two response letters from MEMX.  On March 26, 2020, MEMX consented to another 30- day extension of time. On April 27, 2020, MEMX submitted Amendment No. 3 to the application.

The Commission has reviewed the Exchange's registration application, as amended, together with the comment letters received, in order to make a determination whether to grant such registration. For the reasons set forth below, and based on the representations set forth in MEMX's Form 1, as amended, this order approves MEMX's Form 1 application, as amended, for registration as a national securities exchange.
 
https://www.bloomberg.com/news/articles/2020-05-08/oil-crash-busted-a-broker-s-computers-and-inflicted-huge-losses?srnd=premium
It's a jaw-dropping story expertly told by Bloomberg's Leising. It starts off with Syed Shah's April 20, 2020, trades in his Interactive Brokers account -- he bought crude at $3.30 a barrel, and then 50 cents, and then for one penny each. Unfortunately, day trader Shah hadn't considered what could happen if oil went not just to $0 but negative. As Leising picks up the tale from here:

[O]il's first trip into negative pricing had broken Interactive Brokers Group Inc. Its software couldn't cope with that pesky minus sign, even though it was always technically possible -- though this was an outlandish idea before the pandemic -- for the crude market to go upside down. Crude was actually around negative $3.70 a barrel when Shah's screen had it at 1 cent. Interactive Brokers never displayed a subzero price to him as oil kept diving to end the day at minus $37.63 a barrel.

At midnight, Shah got the devastating news: he owed Interactive Brokers $9 million. He'd started the day with $77,000 in his account.

"I was in shock," the 30-year-old said in a phone interview. "I felt like everything was going to be taken from me, all my assets."

https://www.bloomberg.com/news/articles/2020-05-07/teen-hacker-and-evil-geniuses-accused-of-24-million-theft
You know -- I could sort of ease into this article but, fuggedaboutit, let me allow Bloomberg's Van Voris' prose speak for itself:

A 15-year-old hacker and his crew of "evil computer geniuses" stole nearly $24 million in cryptocurrency from an adviser to blockchain companies, according to a lawsuit filed in New York.

Michael Terpin claims his phone was hacked and his money stolen in 2018 by a ring led by Westchester County, New York, teen Ellis Pinksy as part of a "sophisticated cybercrime spree." Terpin, the founder and chief executive officer of blockchain advisory firm Transform Group, is suing Pinsky, now 18, for $71 million under a federal racketeering law that allows for triple damages.

https://www.reuters.com/article/us-crypto-currencies-bitcoin/coronavirus-sows-doubt-over-bitcoins-rally-after-third-halving-idUSKBN22K2KW
As reported in part by Retuers' Chavez-Dreyfuss:

The first halving occurred in November 2012 when the mining reward was reduced from 50 bitcoins to 25, and the second occurred in July 2016 when it was further cut to 12.5 bitcoin. This deflationary event has historically signaled the start of bitcoin's most dramatic bull runs over a period of several years, although not before a brief sell-off.

The previous two bitcoin halvings propelled rallies of about 10,000% from late 2012 to 2014, and roughly 2,500% from mid-2016 to the currency's all-time high just shy of $20,000 in December 2017, according to traders.

https://www.bloomberg.com/news/articles/2020-05-08/etf-universe-shrinks-for-first-time-with-niche-funds-dying-off?srnd=premium
There was a time when it seemed like every day a new niche ETF was being offered. Frankly, some of the funds looked like they were reaching, if not pandering. Whether the COVID pandemic will cause a thinning of the herd or if such a culling is the inherent self-cleansing of the markets isn't clear to me; but, Blooberg's Ballentine notes:

This year, 68 new funds got off the ground, but 83 de-listed, including the Forensic Accounting Long-Short ETF, the Invesco Shipping ETF and WisdomTree's CBOE Russell 2000 PutWrite Strategy Fund. At this time last year, 83 ETFs had started trading and only 57 had closed, according to data compiled by Bloomberg.

One reason for the recent drop-off in new funds is concern among issuers that any new offering would be lost amid all the focus on the coronavirus. But another factor behind the decrease is that it's getting harder for new offerings to gain traction, Colas noted.

https://www.foxnews.com/us/farmers-dump-food-grocery-stores-shortage-coronavirus
On the one hand, we got folks unable to find food and, if they can, many can't afford to pay. On the other hand, we got farmers letting crops go to waste and ranchers euthanizing their livestock. You'd think that someone could mend those two things together and fix the whole? Then again, that's what you get when you expect big government to act in a timely, effective, and responsive manner. The Fox Business article is replete with fascinating disclosures by reporter McKay, among which is this:

"Before the pandemic, U.S. consumers purchased about a third of their calories and spent over half of their food dollars on food consumed outside of their home - restaurants, fast food, schools, work cafeterias, etc.," explained Dr. Douglas Jackson-Smith, a professor at the School of Environment and Natural Resources at Ohio State University. "The closure of these outlets and stay-at-home orders have radically changed where most Americans buy and consume their food, and the supply chains have been slow to reorganize and respond." "Before the pandemic, U.S. consumers purchased about a third of their calories and spent over half of their food dollars on food consumed outside of their home - restaurants, fast food, schools, work cafeterias, etc.," explained Dr. Douglas Jackson-Smith, a professor at the School of Environment and Natural Resources at Ohio State University. "The closure of these outlets and stay-at-home orders have radically changed where most Americans buy and consume their food, and the supply chains have been slow to reorganize and respond."


Farmers welcome $1.2B in USDA purchases for food banks / The USDA is expected to purchase up to $3 billion in goods (Fox Business by Evie Fordham)
https://www.foxbusiness.com/markets/coronavirus-usda-purchases-farm-food-bank-donations
As reported in part in the Fox Business article:

"Innovative solutions are demanded in these unprecedented times, and I applaud USDA for its actions to provide nutritious dairy products to families in need," said Jim Mulhern, president and CEO of NMPF, the largest U.S. dairy-farmer group.

As U.S. meat workers fall sick and supplies dwindle, exports to China soar (Reuters by Tom Polansek)
https://www.reuters.com/article/us-health-coronavirus-usa-meatpacking-an/as-u-s-meat-workers-fall-sick-and-supplies-dwindle-exports-to-china-soar-idUSKBN22N0IN
As reported in part by Reuters' Polansek:

The disruptions mean consumers could see 30% less meat in supermarkets by the end of May, at prices 20% higher than last year, according to Will Sawyer, lead economist at agricultural lender CoBank.

While pork supplies tightened as the number of pigs slaughtered each day plunged by about 40% since mid-March, shipments of American pork to China more than quadrupled over the same period, according to U.S. Department of Agriculture data. tmsnrt.rs/2YLF1XN

Smithfield, which China's WH Group bought for $4.7 billion in 2013, was the biggest U.S. exporter to China from January to March, according to Panjiva, a division of S&P Global Market Intelligence. Smithfield shipped at least 13,680 tonnes by sea in March, Panjiva said, citing its most recent data.

Smithfield, the world's biggest pork processor, said in April that U.S. plant closures were pushing retailers "perilously close to the edge" on supplies.

Why Chicken Is Plentiful During the Pandemic and Beef Is Not / Poultry production has long been the most industrialized of U.S. agricultural operations. (Bloomberg by Justin Fox)
https://www.bloomberg.com/news/articles/2020-05-11/why-chicken-is-plentiful-during-the-pandemic-and-beef-is-not?srnd=premium
As noted in part by Bloomberg's Fox:

Chicken farming has long been the most industrialized of American agricultural operations, and it keeps getting more so. The birds are bred for maximum meat production and raised in a matter of weeks in controlled indoor environments by farmers under contract to the likes of Tyson Foods Inc. and Pilgrim's Pride Corp. The animals' small, uniform size lends itself to factory-style slaughtering and processing.

Not coincidentally, poultry costs U.S. consumers 62% less in inflation-adjusted terms than it did in 1935, which is how far back the Bureau of Labor Statistics' price data go and was also just a few years after Delaware farmer Cecile Steele pioneered raising chickens by the thousands for their meat. (Before then, farmers kept chickens primarily for the eggs.) Pork, now also raised mostly at factory scale indoors, is 12% cheaper. Beef, which isn't, costs 63% more. "Factory farming" is, with reason, a pejorative, but it's enabled chicken to become the most consumed meat in the U.S.-passing pork in the 1990s and beef a decade ago-and it seems to be helping the industry weather the crisis.

https://www.cftc.gov/PressRoom/PressReleases/8163-20
The CFTC filed a Notice of Intent to revoke the registrations of Phy Capital Investments, LLC (PCI), a registered commodity pool operator, and its chief executive officer and registered associated person, Fabio Bretas de Freitas.
https://www.cftc.gov/media/3851/enfphycapitalnoticeofintent050720/download . As alleged in part in the CFTC Release:

[P]CI and Bretas are subject to statutory disqualification from CFTC registration based on an order and judgment by default entered by the U.S. District Court for the Southern District of New York on October 3, 2019. [See CFTC Press Release No. 8052-19] The order found that PCI and Bretas misappropriated commodity pool funds and issued false quarterly statements to pool participants.  Among other sanctions, the order permanently enjoined PCI and Bretas from further violations of the anti-fraud provisions of the Commodity Exchange Act, and ordered PCI and Bretas to jointly and severally pay more than $17.2 million in monetary relief.

In addition, the notice alleges that Bretas is subject to statutory disqualification from CFTC registration based on his conviction for conspiracy to commit commodities fraud and wire fraud in connection with these same activities, as entered by the U.S. District Court for the Southern District of New York on February 28, 2020.

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