Securities Industry Commentator by Bill Singer, Esq
November 8, 2017Marriage Fraud Scheme Lands Final Defendant in Federal Prison (DOJ Press Release) https://www.justice.gov/usao-sdtx/pr/marriage-fraud-scheme-lands-final-defendant-federal-prison
The defendants paid U.S. citizens for entering into fraudulent marriages to Nigerian nationals who had originally entered the country on tourist visas. The conspirators would then complete immigration documents and falsely submit them to CIS to obtain legal permanent resident status. As part of the conspiracy, the defendants would take staged photographs of themselves as a couple for documentation of an allegedly meaningful relationship. The conspirators also coached the recruits and/or the Nigerian nationals on what to say when questioned or interviewed by law enforcement or immigration officials about the legitimate nature of the marriages.At trial, the government presented evidence that Alabi recruited Nigerian nationals, including Daniel, to enter into "sham" marriages with U.S. citizens to deceive immigration authorities and ultimately gain lawful permanent status in the Unites States. The evidence proved Daniel did knowingly marry Andrews, a U.S. citizen, for the for the purpose of evading any provision of the immigration laws of the United States. At the time of this conspiracy, Alabi and Daniel were citizens of Nigeria and had entered the U.S. temporarily on non-immigrant visas.
SEC Nixes Stay Of Statutory Disqualification (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/3660/stay-statutory-disqualification/
When FINRA finds a Respondent has engaged in a willful failure to disclose, that determination typical earns a statutory disqualification. You ask FINRA and the self-regulator will argue that it did not impose the SD but that it occurs by operation of law. FINRA claims that it does not impose a "statutory disqualification" but merely a finding of willfulness, which triggers the disqualification. That all may strike you as a lot of esoteric, legal mumbo jumbo. It may well be. On the other hand, an appeal of a FINRA finding of willfulness is now on the SEC's radar screen and the ramifications of this academic debate take on very serious real-life consequences.
SEC Warns Investors About Paid-to-Click Scams / Agency
Obtains Court Order to Stop "Ad Packs" Ponzi Scheme (Securities and Exchange
Commission Press Release 2017-208) https://www.sec.gov/news/press-release/2017-208
The SEC issued an INVESTOR ALERT warning investors about "paid-to-click" scams promising an easy payday by merely purchasing a membership or an advertising product and then clicking on a certain number of online ads each day. The ALERT explains that these online advertising programs seem nothing more than Ponzi schemes with little to no revenues other than membership fees or sales of "ad packs." As illustrated in part in Securities and Exchange Commission, Plaintiff, v. Pedro Fort Berbel and Fort Marketing Group LLC, Defendants -- AND -- Sibdes LLC, Relief Defendant (Complaint, United States District Court for the Southern District of Florida, 17-23572 / September 28, 2017):
2. From approximately July 2014 through February 2016, Defendants raised about $38 million from more than 150,000 investors in the United States and abroad by engaging in offering and selling unregistered securities in the form of investment contracts. This offering fraud was a Ponzi scheme, as roughly 99% of the revenues generated by Defendants' businesses came exclusively from other investors' funds.
3. During the relevant time period, Defendants operated at least three separate online businesses which purported to provide legitimate advertising services: MLM Shop, available at mlmshop.net; The Business Shop, available at tbsbusiness.com; and Fort Ad Pays, available at fortadpays.com.
4. Through these websites, Defendants offered the sale of certain investments referred to as "guaranteed plans" and "advertising packs" on the MLM Shop and The Business Shop websites, and "shares," "Ad Packs," and "Ad Credit Packs" on the Fort Ad Pays website (collectively, "Ad Packs"). Defendants solicited investors to purchase Ad Packs through these websites and promotional videos, available in English, Spanish, and French, and linked directly from the websites. These materials promoted Defendants' businesses as successful online advertising and marketing companies.
5. In reality, Defendants' claims of operating legitimate businesses were fictitious. The websites' seeming professionalism concealed their true purpose of offering and selling securities to perpetuate Defendants' Ponzi scheme, including representing to investors that the sale of Ad Packs was not a Ponzi scheme. The businesses had virtually no other revenue from any other source. The monies raised from investors were used to make payments to other investors and for the Defendants' personal expenses.
6. Defendants diverted roughly $4.3 million of investor funds for Berbel's personal use. At least $1.25 million of these funds were transferred by Defendants to the Relief Defendant, Sibades LLC, in February 2015 for the purchase of Berbel's private home in South Florida. More than $20,000 in investor funds were also used to pay the property taxes for his home.
https://www.justice.gov/usao-sdny/pr/chairman-purported-hedge-fund-sentenced-conspiring-commit-securities-and-wire-fraud
In or about October 2013, MITSAKOS created a purported hedge fund called Matrix Capital ("Matrix"), which claimed to be a long-short fund with a long track record of success. In order to raise money for his fund, MITSAKOS sent marketing materials to numerous potential investors claiming that Matrix had achieved outsized returns that exceeded major indices like the S&P 500. One newsletter sent to potential investors, for example, claimed that Matrix had achieved returns of approximately 25% in 2012, 66% in 2013, 20% in 2014, and 49% between January and October of 2015. MITSAKOS also led potential investors to believe that these returns were based on actual securities trades by Matrix, and that Matrix had tens of millions in assets under management ("AUM").MITSAKOS's representations regarding Matrix's performance and AUM were false. In fact, Matrix had no track record in actually purchasing and selling securities, and, indeed, had no meaningful assets at all until receiving funds from a victim in September 2015. Instead, the purported performance results provided to potential investors were premised on how a hypothetical portfolio would have performed had Matrix actually acquired certain securities. No such trading actually took place and Matrix never actually owned any of the securities in the hypothetical portfolio that MITSAKOS maintained. Even in regard to Matrix's hypothetical investment portfolio, MITSAKOS retroactively manipulated the investments in that portfolio from time to time in order to improve dramatically its hypothetical performance.Based in part on these and other misrepresentations, Matrix received approximately $2 million from an investor in September 2015. However, MITSAKOS used only a portion of that amount - about $1.2 million - to actually buy and sell securities. Of the remaining amount, MITSAKOS spent hundreds of thousands of dollars on business expenses and personal expenses like car payments, credit cards, and his own rent. MITSAKOS's trading of the $1.2 million that he did invest, moreover, resulted in significant losses.