Securities Industry Commentator by Bill Singer Esq

GUEST BLOG: Bill Singer Talks To Industry Recruiter Michael King of Michael King Associates (BrokeAndBroker.com Blog)

SEC Awards Over $2.5 Million to Joint Whistleblowers for Detailed Analysis That Led to Multiple Successful Actions (SEC Release)

Antitrust Division Seeks Public Comments On Updating Bank Merger Review Analysis (DOJ Release)

Four Charged For Multi-Million Dollar Elder Fraud Schemes (DOJ Release)

SEC Charges Connecticut Investment Adviser with Stealing Client Funds (SEC Release)

Florida man indicted on fraud charges involving nearly $5 Million (DOJ Release)

Former Illinois Accountant Sentenced to More Than 16 Years in Prison for Misappropriating $77 Million From Individuals and Financial Institutions (DOJ Release)

CFTC Charges 20 Entities for Making False Registration Claims (CFTC Release)

St. Bernard Financial Service, Inc. CEO Robert Keenan Announces Run For FINRA NAC

The Securities and Exchange Commission today announced an award of over $2.5 million to joint whistleblowers whose tip based largely on highly probative independent analysis of a public company's filings led to several successful enforcement actions.  In addition to their tip, the whistleblowers provided helpful assistance early in the investigation, which helped save Commission time and resources. 

FOOTNOTE 1: We have determined to treat claimant 1 and claimant 2 jointly as a "whistleblower" for purposes of the award determination given that a Form TCR was submitted on behalf of both of them and they submitted their Forms WB-APP together via the same counsel. See Securities Exchange Act of 1934 ("Exchange Act") Section 21F(a)(6) (defining a "whistleblower" to include two or more individuals acting jointly who provide information relating to a violation of the securities laws to the Commission). Our proceeding in this way has not impacted the total award percentage to claimants. Unless claimants, within ten (10) calendar days of the issuance of this Order, make a joint request, in writing, for a different allocation of the award between the two of them, the Office of the Whistleblower is directed to pay each of them individually 50% of their joint award.

FOOTNOTE 2:  For the purposes of making an award, we consider the administrative actions in this matter as a single Covered Action because they arose out the same nucleus of operative facts. See Exchange Act Rule 21F4(d)(1), 17 C.F.R. §240.21F-4(d)(1)

The Department of Justice's Antitrust Division announced today that it is seeking public comments into whether the division should revise the 1995 Bank Merger Competitive Review guidelines ("Banking Guidelines") to reflect emerging trends in the banking and financial services sector and modernize its approach to bank merger review under the antitrust laws. Today's announcement is part-and-parcel of the division's broader efforts and increased focus on protecting competition in the financial markets and follows the recent remarks and announcement by Assistant Attorney General for the Antitrust Division Makan Delrahim, concerning the realignment of commodities at the division.

[F]rom January 2003 to September 2016, the defendants mailed hundreds of thousands of prize notices that represented that victims were specially chosen to receive a large cash prize and would receive the prize if they paid a small fee.  Victims who paid the requested fee, however, did not receive the promised cash prize.  Although the notices appeared to be personalized correspondence, they were merely mass-produced, boilerplate documents that were bulk mailed to recipients whose names and addresses were on mailing lists.

According to the indictment, Novis and Denkberg continued to operate their fraudulent mass-mailing scheme in violation of United States Postal Service cease-and-desist agreements and consent orders that they agreed to in 2012.  The agreements and orders had permanently barred the defendants from mailing fraudulent prize notices.

[T]he solicitations were sent using fictitious names and were designed to deceive recipients into believing that they had won hundreds of thousands or millions of dollars.  To claim their winnings recipients were directed to pay a small fee.  In fact, there was no cash prize sent to victims, and Quaglia, Fraser and their co-conspirators pocketed the money sent by victims. 

The scheme allegedly caused millions of dollars in losses to thousands of victims.  Quaglia was charged with one conspiracy to commit mail fraud count and seven counts of mail fraud.  Quaglia's scheme is alleged to have begun as early as 2000.  Fraser was charged with conspiracy to commit mail fraud with Quaglia and with a separate conspiracy charge related to a similar scheme he orchestrated after breaking away from Quaglia's operation in 2015.  Fraser was also charged with six counts of mail fraud.  Each charge of the indictment carries a statutory maximum sentence of twenty years in prison along with a statutory maximum fine of $250,000 or twice the gross gain or gross loss from the offense.

[B]eginning in February 2019, Clason stole over $300,000 from a retired 73-year-old advisory client. According to the SEC's complaint, Clason perpetrated the fraud by liquidating securities in the client's accounts, transferring the proceeds from the sales to a bank account held jointly with the client for investment purposes and to facilitate the payment of miscellaneous monthly expenses, and withdrawing cash from the account on numerous occasions and at different bank locations. The complaint alleges that the client did not know of or approve the withdrawals and did not receive the cash that Clason withdrew.

Conley operated a company by the name of Alpax, LLC, portraying himself as an investment advisor living and working out of Morgantown and Kingwood, West Virginia, Washington, D.C., and Virginia. He is alleged to have developed a scheme to defraud investors by convincing the victims to give him and his companies money for him to invest for returns for the victims. The victims included churches, pastors, at least one parishioner, and his adoptive mother and step-father. He is accused of giving the victims a false sense of security by mailing them false dividend statements, claiming a positive rate of return for their investments. Conley allegedly fraudulently obtained approximately $5.2 million dollars from 18 victims, but invested little or none of that money and spent much of it on private jet flights, expensive meals, clothes, jewelry, housing and living expenses for himself, returning only about $210,000 to the victims.

Issa was a certified public accountant and the Chief Financial Officer of a group of partnerships, corporations, and trusts owned by a Chicago-area family.  From 2010 to 2017, he embezzled at least $45 million of the family's assets, including money Issa stole from a trust account that was set up to pay medical expenses for a family member suffering from an incapacitating illness.  Issa also fraudulently obtained at least another $5.1 million from individuals in his personal capacity, claiming he would invest their money in legitimate opportunities, including a luxury auto dealership Issa owned in Burr Ridge.

Issa used fraud proceeds to cover personal expenses and to secure fraudulent loans from financial institutions totaling at least $83 million to acquire, among other things, 25 residential properties in Illinois, Montana, Michigan, and Cabo San Lucas, Mexico, two private aircraft, four yachts, approximately 60 firearms, and assorted watches, jewelry, and memorabilia. 

Issa attempted to conceal the scheme by providing financial institutions with fraudulent loan documents and forging authorizations to gain control of funds belonging to the family-owned group.  Issa also created false account statements and made Ponzi-type payments to individual investors.

False Claims of CFTC Registration and NFA Membership

The CFTC's complaints allege that the 15 entities listed below falsely claimed to be registered with the CFTC and NFA while offering services related to trading in futures or other derivatives:

• 10 of the complaints charge identical false claims made by entities allegedly located in Walsall, United Kingdom: Bitfx24option.com, Fidelityfxtrade.com, Granttradefx.com, iMarketsserviceFX.com, Toptradecapitalfx.com, Westtechtrade.com, Westintrade.com, Yobcryptotrade24.com, Zenithoptionstrade.net, and Zenithtradermarkets.com. All 10 falsely claimed on their websites that the entity "is a registered FCM and RFED with the CFTC and member of the [NFA]" and provided a NFA ID. As alleged in the complaints, these 10 entities have never been registered with NFA in any capacity, and according to a NFA database, the NFA ID identifies an individual who was once registered with the CFTC but died in 2009.
   
• Sumtrades.com, allegedly located in Atlanta, Georgia, falsely claimed on its website that it "is a registered FCM and RFED with the CFTC and member of the [NFA]" and provided a NFA ID belonging to an individual who was once registered with the CFTC but died in 2009. As alleged in the complaint, the entity has never been registered with NFA in any capacity.
  
  
• Goldman Global Investment Funds Ltd., allegedly located in California and Hong Kong, misleadingly and falsely displayed on its website, the NFA logo and name, a NFA ID, and claimed to be supervised by the CFTC. The NFA ID it used belongs to an entity with the same name that notified NFA that it operated an exempt commodity pool for which the claim of exemption was withdrawn earlier this year.
  
  
• Merryl Morgan, allegedly located in New York, Hong Kong, and Singapore, falsely claimed on its website that it is a "registered FCM with the CFTC and NFA," however, no such entity is registered with the CFTC or a member of NFA in any capacity.
   
• Swiss FX Trade, allegedly located in New York City, falsely claimed on its website that it is a "registered FCM with the CFTC and NFA," however, no such entity is registered with the CFTC or a member of NFA in any capacity.
   
• Ultracapitals, allegedly located in Cambridge, Massachusetts, falsely claimed on its website that it is a "registered FCM with the CFTC and NFA," however, no such entity is registered with the CFTC or a member of NFA in any capacity.

False or Misleading Claims of NFA Registration or Licensure

The CFTC's complaints allege the three entities listed below made false or misleading claims of NFA registration or licensure:

• Vertex Holdings Limited, allegedly founded in Moscow, Russia, but with no listed address, falsely claimed on its website that it is a Corporate Authorized Representative of its prime broker. The entity also claimed that its prime broker is regulated by NFA and provided a NFA ID for the purported prime broker, however, the complaint says, this purported prime broker is not and has never been a NFA member. Rather, the NFA ID that Vertex Holdings is using belongs to an entity that notified NFA it operated an exempt commodity pool for which the claim of exemption was withdrawn earlier this year.
   
• United Financial Limited, allegedly located in Century City, California and at another address in an unspecified city and country, falsely claims on its website that it is "authorized and regulated by NFA" and lists a NFA ID, when in fact, it does not have and has never had, NFA membership. Instead, an entity with the same name notified NFA that it operated an exempt commodity pool, obtained the same NFA ID, and that the claim of exemption was withdrawn earlier this year.
   
• DST Clouds International Limited, allegedly located in the United Kingdom at a nonexistent address, falsely claimed that it is "authorized and regulated by NFA" and listed a NFA ID, when in fact, it is not, and has never had NFA membership. Instead, an entity with the same name notified NFA that it operated an exempt commodity pool, obtained the same NFA ID, and that the claim of exemption was withdrawn earlier this year.

False or Misleading Claims Using NFA IDs Assigned to Other Registrants

The CFTC's complaints allege that the two entities listed below made false or misleading claims of NFA registration by using the names or NFA IDs of properly registered NFA members:

• Bullet Capital & Contract Occurrence Management Merchants, allegedly located in Fairfield, Connecticut and Kossldorf, Austria, falsely claimed that it is NFA-registered and provided a hyperlink to NFA's BASIC database record for a registered commodity trading advisor with a similar name. However, the registered commodity trading advisor did not operate the entity or the website that made the misleading claims.
   
• ESOM, allegedly a registered licensed corporation of the Hong Kong Securities and Futures Commission, displayed the text "National Futures Association regulation," a NFA ID, and the name of the actual registered person associated with that NFA ID next to its logo and trade name at the top of pages on its website. The name and NFA ID belong to a registered commodity pool operator that does not operate ESOM and is not being charged with any wrongdoing.

Robert Keenan is the Owner and Chief Executive Officer of St Bernard Financial Services, Inc., a firm he founded in 1994. He holds the Series 7, 24, 28, 53, 63, and 65 licenses. He also is the Chief Compliance Officer, the Financial Operations Principal, the Municipal Principal, the Sales Manager, and head of IT. Keenan's background includes over 43 years of senior management and sales positions. He started in the securities industry with IDS/American Express. He founded St Bernard after a short stint with Washington Square Securities. In addition to the duties of his various positions, Keenan maintains an active base of investment clients. 

He holds a Bachelor of Science in Business Administration from the University of Arkansas and a Master of Business Administration from the University of Central Arkansas. 

Keenan has previously served on the Boards of Main Street Russellville, the WestArk Area Council of the Boy Scouts, The Arkansas River Valley Bank, the Arkansas State Plant Board, the Tri-County Regional Water Distribution District, and the Russellville Airport Commission. 

He has previously served a term on FINRA's Board of Governors. He is currently on FINRA's Regional Committee and has been a Hearing Officer on several FINRA disciplinary hearings. He has been a panelist at several FINRA conferences going as far back as FINRA's 1999 Annual meeting on Y2K preparation for small firms. 

Keenan believes the NAC would benefit from having a member that has experience in the trenches.

• Securities Industry Commentator
• Bill Singer