Securities Industry Commentator by Bill Singer Esq WEEK IN REVIEW
May 5, 2018
http://www.rrbdlaw.com/3958/securities-industry-commentator/
In today's
Securities Industry Commentator feed:
United
States of America, Appellee, v. Jesse C. Litvak, Defendant/Appellant (Opinion, United States
Court of Appeals for the Second Circuit, 17-CR-1464 /May 3, 2018) READ
FULL TEXT 2Cir Opinion Appeal
from a conviction by a jury in the United States District Court for the
District of Connecticut (Janet C. Hall, Chief Judge), on one count of
securities fraud. Appellant principally argues that his misstatements were, as
a matter of law, immaterial to a reasonable investor in the market for
residential mortgage backed securities. We hold that his misstatements could be
found by a jury to be material. However, the district court materially
erred in admitting evidence that the counterparty representative in the sole
transaction underlying the count of conviction mistakenly believed that
appellant was his agent. Accordingly, we vacate the judgment of conviction and
remand
Three
Men Arrested For Scheme To Defraud Elderly Victims In The Sale Of Worthless
Stock / Vladimir Ziskind, a/k/a "Mike Palmer," Keith Orlean, a/k/a "Jack
Allen," and Kevin Weinzoff, a/k/a "Mike Palmer," Solicited Stock Purchases from
Elderly Victims Using Fake Names, False Information, and Bogus Promises of High
Returns
(DOJ Press Release) In a Complaint filed in the United States District Court
for the Southern District of New York, federal prosecutors charged Vladimir Ziskind a/k/a "Mike
Palmer" and Kevin Weinzoff a/k/a
"Mike Palmer" and Keith
Orlean a/k/a "Jack Allen" each with with one count
of conspiracy to commit securities fraud, one count of securities fraud, one
count of conspiracy to commit wire fraud, and one count of wire fraud.
The Complaint alleges that a salesman named "Mike Palmer" would call elderly
persons on the phone and offer them what he claimed was a time-sensitive
opportunity to buy stock in certain companies. Allegedly, the tips were
fabricated and there was no "Mike Palmer," and the salesman was actually
Ziskind or Weinzoff. The companies for which the investments were being
solicited were allegedly controlled by Ziskind or Weinzoff. The FBI
asserts that since April 2014, the defendants convinced over 50 elderly persons
to purchase over $2 million stock as part of the alleged scheme.
FINRA
Hardship Waiver Hard To Find (BrokeAndBroker.com Blog) After
you read today's regulatory case, you may be puzzled. Even after you have
digested the facts, you may be unsure whether FINRA is right or its member firm
is right -- or maybe they're both wrong. The BrokeAndBroker.com Blog publisher
Bill Singer Esq has read and re-read the underlying documents in a festering
dispute involving a FINRA member firm that asked for a hardship waiver of
several thousand dollars in arbitration fees. The assessed fees are customary
and not particularly excessive. On the other hand, FINRA says it has a
"hardship exemption," which might have been appropriately granted
when first requested by the member firm. Regardless, we are also asked to
confront that old saying that "what's then is then and what's now is
now." As we look back from today's vantage point at the mounting legal paperwork
and the increasingly larger dollars clicking off on the taxi meter of fees,
costs, and expenses running for such appeals, it all seems absurd. Ahhhh . .
. perhaps that's something we can all agree on?
Antony
Lee Turbeville, Appellant, v. Department of Financial Services, Appellee, (Opinion, Florida First
District Court of Appeal, No. 1D17-221 / May 3, 2018) Appellant Antony
Lee Turbeville challenged a Final Order of the Department of Financial Services
revoking Appellant's insurance license. Appellant argues, in part, that:the
Department's application of the section 626.621(13), Florida Statutes, to
licensees of the Financial Industry Regulatory Authority ("FINRA") violates a
licensee's constitutional right to remain silent. The Florida Court of
Appeal concluded, in part, that:FINRA rules and federal court rulings state
that if the Extended Hearing Panel's decision is appealed, the decision by the
National Adjudicatory Council is FINRA's final action. Additionally, because
testimony to FINRA is not compelled by State action, the use of testimony in
FINRA license-revocation proceedings does not violate the right to remain
silent as found in the Fifth Amendment
SEC
Seeks Order Requiring Shawn Carter to Comply With Subpoena for Testimony (SEC Litigation
Release No. 24131) The SEC filed a subpoena enforcement action in the United
States District Court for the Southern District of New York against Shawn
Carter seeking an order directing him to comply with an investigative subpoena
for his testimony. The SEC is allegedly investigating potential violations of
the federal securities laws related to the financial reporting of New
York-based Iconix Brand Group, Inc., which paid Carter more than $200 million
to acquire intangible assets associated with Carter's Rocawear apparel brand.
In March 2016, Iconix publicly announced a $169 million write down of Rocawear,
and in March of this year, Iconix announced a further write down of $34
million. NOTE: Shawn
Carter is also known as "Jay-Z"
Cambridge
Hedge Fund Manager Sentenced for Investment Fraud Scheme (DOJ Press Release)
Yasuna J. Murakami was a managing member of investment advisory firms MC2
Capital Management LLC and MC2 Canada Capital Management LLC. Through those two
advisory firms, Murakami established and managed hedge funds: the MC2 Capital
Partners Fund, MC2 Capital Value Fund, and MC2 Capital Canadian Opportunities
Fund. Murakami allegedly diverted millions of dollars of investor funds to
business and personal accounts that he controlled and engaged in a Ponzi-like
scheme to repay earlier investors' redemption requests. As part of the fraud,
Murakami withheld material information and provided falsified account
statements and tax documentation in an effort to lull investors into
complacency. In a parallel action, the Securities and Exchange Commission filed
charges against Murakami and his former business partner, Avi Chiat; and the
Massachusetts Securities Division also filed civil fraud charges against
Murakami for the same conduct. Following his guilty plea, Murakami was
sentenced in the United States District Court for the District of Massachusetts
to six years in prison and three years of supervised release; and ordered
Murakami to pay $10,520,634 in restitution and forfeit a luxury sports car that
was purchased with proceeds of the fraud.
http://www.rrbdlaw.com/3957/securities-industry-commentator/
In today's
Securities Industry Commentator feed:
Maple
Heights man indicted for robbing Cleveland bank one day after getting out of
prison for robbing the same bank (DOJ Press Release) Markiko Sonnie Lewis
robbed the Key Bank at 15000 St. Clair Ave. on April 12 of about $1,044. Lewis
was released from prison the day before the robbery, and, in fact, he had been
incarcerated for previously robbing the same bank. Lewis was indicted in the
United States District Court for the Northern District of Ohio on one count of
bank robbery. I'm gonna bet that Lewis' favorite film is Groundhog Day.
SEC Charges North Carolina-Based Microcap Company,
its CEO, and Others in Scheme to Defraud Investors (SEC Litigation
Release No. 24126) In a Complaint filed in the United States District Court for
the Northern District of Georgia, the SEC alleged that that Revolutionary
Concepts, Inc. (REVO) and its CEO/director, Solomon RC Ali (also known as
Richard M. Carter), engaged in transactions that involved persons with close,
but undisclosed, relationships to Ali, and then made false and misleading
statements about the transactions in press releases and public filings with the
SEC. TheComplaint alleges that Rainco Industries, Inc. and Nicole C. Singletary
aided and abetted the fraud; that Ali, Rainco, Singletary, and attorney Earnest
H. (Woody) DeLong, Jr. violated beneficial ownership reporting requirements of
the federal securities laws; and that Ali is liable for antifraud and reporting
violations by microcap public company Universal Bioenergy, Inc. (UBRG).
South Florida Stock Promoters Charged with
Securities Fraud in Relation to Pump and Dump Stock Manipulation Scheme
(DOJ Press Release) Eddy Ubaldo Marin (a convicted felon) was charged by a
criminal information in the United States District Court for the Southern
District of Florida with one count of securities fraud. Shane R. Spierdowis was
charged by separate criminal information with one count of conspiracy to commit
securities fraud. The defendants were named in connection with an alleged $1
million pump and dump securities fraud scheme involving the shares of Valentine
Beauty, Inc. ("VLBI"), a beauty supply company that marketed its products via
informercials..Prosecutors alleged that Marin and other accomplices obtained a
controlling interest in VLBI stock by issuing shares to certain third parties,
including Green Tree Capital, Inc., a company controlled by Marin. Thereafter,
the shares were transferred into accounts controlled by Spierdowis and other
co-conspirators. Marin, Spierdowis and others allegedly arranged for VLBI
to issue press releases, while also using internet marketing and penny stock
newsletters to tout VLBI stock. Marketing newsletters and other email marketing
were used to artificially increase the trading volume and price of VLBI shares,
so that Marin, Spierdowis and their co-conspirators could sell about $1 million
worth of shares to the investing public. Federal prosecutors allege that while
incarcerated in federal prison, Marin was visited by Spierdowis and
during these visits the defendants coordinated the sale of VLBI shares and
discussed activites related to other stocks. A parallel civil enforcement
action was filed by the SEC against Marin and Spierdowis.
Pro Se Employee Eviscerated In FINRA Employment Expungement Arbitration (BrokeAndBroker.com Blog) Mind your manners! Listen up everyone: Wall Street is no longer a rough and tumble, winner-takes-all place. Proper etiquette will now be observed. You gentleman and ladies will say "please," "thank you," and "excuse me." You will always be polite to everyone at all times. Think this is a joke? Well, perhaps you might read today's BrokeAndBroker.com Blog article about a recent FINRA arbitration and, when you're finished, say "thank you" to that nice man Mr. Singer.
Principal of $42 Million Ponzi-Like Scheme Sentenced
To 33 Months' Imprisonment (SEC Litigation
Release No. 24128) On October 29, 2014, Mark Feathers was indicted United
States District Court for Northern District of California on seventeen counts
of securities fraud and twelve counts of mail fraud in connection with
Feathers' management and operation of Small Business Capital and the funds it
managed. On December 20, 2017, Feathers pled guilty to one count of mail fraud.
The criminal charges arose from the same conduct alleged in a 2012 action
brought by the SEC that alleged over 400 investors were snared in a Ponzi-like
scheme involving promises that profits from mortgage investments would yield
annual returns of 7.5 percent or more. On August 16, 2013, the SEC obtained
summary judgment against Feathers and on November 6, 2013, the court entered a
final judgment against Feathers, permanently enjoining him from violating
Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 thereunder, and ordered him to pay
disgorgement in the amount of $7,782,961 and a $10,000 civil penalty. On
March 7, 2018, Feathers was sentenced to 33 months imprisonment, to be followed
by three years of supervised release, and the payment of restitution in the
amount of $5,724,767.
http://www.rrbdlaw.com/3954/securities-industry-commentator/
In today's
Securities Industry Commentator feed:
Former
Netflix, Inc. VP Charged In Scheme To Defraud / Defendant accused of taking
kickbacks from companies seeking to do business with Netflix (DOJ
Press Release) Michael Kail was indicted in the United States District Court
for the Northern District of California on nineteen counts of wire fraud, three
counts of mail fraud, and seven counts of money laundering in connection with
allegations that he accepted kickbacks for approving payments to at least nine
companies seeking to do business with Netflix, where he was Vice President in
charge of the company's Internet Technology department. Federal prosecutors
alleged that Kail engaged in honest services fraud resulting in his receipt of
over $500,000 from at least three outside companies; and he also received
valuable stock options from numerous other Netflix business
partners.
SEC Enforcement Division Issues FAQs for Share Class
Selection Disclosure Initiative (SEC Release 2018-75) The SEC's
Division of Enforcement issued answers to frequently asked questions (FAQs) on
the Share Class Selection Disclosure Initiative, which seeks to protect
advisory clients from and return money to those affected by undisclosed
conflicts of interest. The FAQs provide additional information about
adviser eligibility, disgorgement, and the distribution of funds to
clients.
Solicited System Snafu Stiffs Settling Stifel
Stockbroker (BrokeAndBroker.com
Blog)
Oh my. You got a ticket to ride but it's a one-way ticket to the old FINRA
slammer. You're supposed to check "BUY" when it's a buy and
"SELL" when it's a sell and "SOL" when it's solicited and
"UNSOL" when it's unsolicited and . . . well, there's lots of boxes
and lines that require all the terms of the ticket. Visit enough trading desks
and you'll hear the tales of the idiot who entered ABZ instead of ABC or wound
up creating an artificial short when he sold 100,000 shares instead of bought
them. In today's BrokeAndBroker.com Blog, we feature the tale of a stockbroker
who couldn't do something but then could but his firm's order-entry system was
wrongly programmed so he couldn't do what he wasn't allowed to do but now could
but for the IT snafu. So . . . our enterprising stockbroker engaged in a bit of
self-help. I'm guessing that, one day, they'll tell his story on the trading
desk. No one's laughing today but, you know, give it some time. Wall Street
loves misery and a good joke about it.
Man Pleads Guilty to $1.2 Million ATM Skimming
Scheme (DOJ Press Release)
Roberto De Miranda Martinez pled guilty to conspiracy to commit bank fraud, and
bank fraud in connection with a $1.2 million ATM skimming and cloned card
scheme. When De Miranda Martinez was apprehended by authorities, he was
installing a card reading ATM skimming device and camera on an ATM.
Former 5linx Owner Pleads Guilty To Wire Fraud And
Tax Charge For His Role In Multi-Million Dollar Marketing Scheme (DOJ
Press Release) Craig Jerabeck pled guilty in the United States District Court
for the Western District of New York to conspiracy to commit wire fraud and
filing a false tax return. Federal prosecutors alleged that Jerabeck, serving
as President/Chief Executive Officer, and co-Defendnats Jeb Tyler, serving as
Vice President, and Jasn Gluck, servign as Vice President and Secretary,
started 5LINX Enterprise, Inc., which offered utility and telecommunications
services, health insurance, nutritional supplements, and business services through
independent sales representatives. The three defendants allegedly sold 5LINX
stock valued at $5.5 million to investment companies Trillium Lakefront
Partners III, L.P.; Trillium Lakefront Partners III, NY L.P.; and Shalam
Investment Co., L.L.C. The Defendants received about $2.3 million from a vendor
without 5LINX's investors, Board, or other stockholders despite such receipt
being a violation of the executives' Stockholders Agreements. Jerabeck
allegedly failed to report 5LINX income and took inappropriate deductions
amounting to about $118,620 in Internal Revenue Service tax losses. Charges are
pending against Tyler and Bluck.
http://www.rrbdlaw.com/3951/securities-industry-commentator/
In today's
Securities Industry Commentator feed:
SEC Charges
Lawyer and Two Others in Microcap Fraud Schemes (SEC Litigation Release No. 24122)
The filed a Complaint alleging that attorney Diane J. Harrison, Esq. and her
husband, Michael J. Daniels manufactured at least five microcap issuers as part
of a scheme to resale shares to the public. The Complaint asserts that the
companies falsely appeared to be pursuing bona fide business with independent
management and shareholders, among which were Harrison and Daniels' friends and
family (including defendant Catherine A. Bradaick-Zolla). The Complaint further
alleges that Daniels and Harrison sold four of the five companies to Andy Z.
Fan of Las Vegas, Nevada and, along with Bradaick-Zolla, continued to provide
support to Fan, in part, by preparing false SEC filings. The SEC's complaint
also alleges that Harrison participated in a separate fraudulent scheme
involving at least 11 undisclosed blank check companies secretly controlled by
Alvin S. Mirman and Sheldon R. Rose, against whom the SEC previously filed
enforcement actions and who were convicted of criminal charges and sentenced to
prison. Separately, the SEC had settled with Fan, AF Ocean Investment
Management Company, and ChinAmerica Andy Movie Entertainment Media
Company)
Court Enters Final Judgment Against Microcap
Executive and Co-Defendant Involved in Fraudulent Scheme (SEC Litigation
Release No. 24123))
The United States District Court for the District of Massachusetts entered a
default judgment against Christopher R. Esposito, the owner and Managing
Director of Lionshare Ventures, LLC. The SEC's Complaint alleged Esposito,
Lionshare, and several co-defendants were involved in raising over $550,000
through an unregistered offering of Lionshare securities and then
misappropriated $375,000 of which $75,000 was used to acquire control of Cannabiz
Mobile, Inc. Thereafter, Esposito and Lionshare, and co-defendant Anthony Jay
Pignatello allegedly concealed Esposito and Lionshare's de facto control of
Cannabiz and a large percentage of Cannabiz's securities in order to evade SEC
Rule 144 through such purported subterfuge as installing co-defendant James
Gondolfe as the sole officer and director of Cannabiz.
UPDATE:
Medical Marijuana Biz Goes Up In SEC Smoke (BrokeAndBroker.com
Blog WARNING! Today's BrokeAndBroker.com Blog updates its earlier report about
a Securities and Exchange Commission case against a medical marijuana company.
This story includes discussion of drugs and drug use,depictions of drug use and
drug users, and contains obscene language . If you are easily offended, please
do not read beyond this point. Readers of today's article may experience
dizziness, nausea, projectile vomiting, constipation, and a four-hour
erection.
CFTC Charges Charles H. McAllister of Alabama with
Engaging in a Fraudulent Precious Metals Scheme
/ McAllister Charged with Two Counts of Wire Fraud and
One Count of Money Laundering in a Related Criminal Action (CFTC Release
7720-18) CFTC filed a Complaint in the United States District Court for the
Western District of Texas against Charles H. McAllister,charging him with fraud
and misappropriation in connection with contracts of sale of precious metals through
his company, BullionDirect, Inc. that purportedly resulted in over $16 million
in customer losses.. CFTC alleges that McAllister has never been registered
with the CFTC in any capacity. CFTC seeks restitution to defrauded customers,
disgorgement of ill-gotten gains, trading bans, a civil monetary penalty, and a
permanent injunction against future violations of federal commodities laws. In
a parallel criminal proceeding, the United States Attorney's Office for the
Western District of Texas charged McAllister with two counts of wire fraud and
one count of money laundering.
Panasonic Charged With FCPA and Accounting Fraud
Violations (SEC
Release 2018-73)
Panasonic Corp. consented to an SEC Order finding that it violated the
anti-bribery, anti-fraud, books and records, internal accounting controls, and
reporting provisions of the Securities Exchange Act of 1934, and ordering it to
pay approximately $143 million in disgorgement and pre-judgement
interest. In pertinent part, the SEC Order According to the SEC's order
found that the company's U.S. subsidiary, Panasonic Avionics Corp. (PAC),
offered a lucrative consulting position to a government official at a
state-owned airline to induce the official to help PAC obtain and retain
business..PAC ultimately retained the official and paid approximately $875,000
for a position that required little to no work, using an unrelated third-party
vendor to conceal the payments. In a related criminal matter, DOJ
announced that PAC would pay a $137 million as part of a deferred prosecution
agreement.
CFTC Orders Glencore Agriculture B.V. and Glencore
Ltd. to Pay a $2 Million Penalty for Exceeding Cotton Futures Position Limits,
Transacting Illegal EFPs, and Submitting Inaccurate Form 304s
/ Cotton Trading by Glencore Agriculture B.V. and
Glencore Ltd. Was under Common Control by Head of Glencore Cotton Trading (CFTC
Release 7721-18) The CFTC issued an order filing and settling charges
against Glencore Agriculture B.V., f/k/a Glencore Grain B.V. (Glencore B.V.),
and Glencore Ltd., finding that during May 2013, June 2013, May 2014, and June
2014, Glencore B.V. and Glencore Ltd. held net positions in the ICE Futures
Cotton No. 2 contracts that when aggregated exceeded speculative position
limits. The CFTC Order found that on twenty-four occasions between
January 2013 and November 2015, Glencore B.V. and Glencore Ltd. executed wash
trades when they exchanged futures for physical transactions opposite each
other's cotton futures trading accounts, even though their accounts were not
independently controlled. Finally, on at least two occasions in 2013 and 2014,
Glencore B.V. submitted to the CFTC a Form 304 that failed to represent
accurately all required information. The CFTC Order requires Glencore B.V. and
Glencore Ltd., jointly and severally, to pay a $2 million civil monetary
penalty and to cease and desist from further violations of the Commodity
Exchange Act (CEA) and CFTC Regulations, as charged.
http://www.rrbdlaw.com/3949/securities-industry-commentator/
In today's
Securities Industry Commentator feed:
Boston-Area
Investment Adviser Pleads Guilty to Fraud (DOJ
Press Release)
Investment Adviser James Polese pled guilty to one count of conspiracy and
investment adviser fraud, eight counts of bank fraud, and one count of aggravad
identity theft in connection with his diversion of clients' funds for personal
investments and expenses. Federal prosecutors had alleged that, in part,
Polese and Cornelius Peterson (who has also pled guilty to his role) misappropriated
about $100,000 from a client's account to invest in a wind farm project despite
the fact that it was not an investment opportunity authorized by their company,
and misappropriated another $400,000 from another client's account to back a
letter of credit in support of the wind farm project.
Financialindustryregulatory
Arthur-Iddy's BrokenCzech Tool
(BrokeAndBroker.com Blog)
In promoting its online BrokerCheck, FINRA asserts that "BrokerCheck is a
free tool to research the background and experience of financial brokers,
advisers and firms." Yeah, tool indeed! Consider a recent FINRA
arbitration and how useful BrokerCheck would be in researching some of the
named parties.
Addis Businessman Sentenced to 42 Months in Prison
for Investment Fraud Scheme (DOJ
Press Release)
William Todd Cutrer owned and operated West Baton Rouge Credit, Inc. ("WBRC"),
which made high-interest loans to individual customers. Cutrer obtained over
$500,000 in lines of credit from local banks and solicited investments from
individuals by guaranteeing he would pay interest and that their funds could be
redeemed upon written notice. Cutrer diverted the proceeds to himself and his
family members, and made Ponzi-like payments to prior investors who were due
interest on their principal. When Cutrer was unable to make further
payments he fraudulently stated that an August 2016 flood had inhibited his
ability to collect payments on WBRC's high-interest loans. Cutrer pled guilty
to mail fraud and was sentenced to 42 months in federal prison plus two years
of supervised release, and ordered to pay $502,035.09 in restitution.
Two Foreign Nationals Sentenced to Federal Prison
for Role in Austin-Based Multi-Million Dollar S.I.R.F. Scheme (DOJ
Press Release)
Federal prosecutors alleged that Ibrahim Alu and George Ismail had entered the
United States claiming to be Sudanese citizens escaping persecution and
requested asylum. Both claims were eventually denied by the Department of
Homeland Security because neither Alu or Ismail could establish their
identities and their claims were determined to be false. It was determined that
the two were Nigerian citizens and, as such, could not be deported back to the
Sudan. Amazingly, Alu and Ismail were permitted to remain in the United States
and given permission to work here. And work they did! Prosecutors alleged that
Alu and Ismail participated in a conspiracy that, in part, operated a cleaning
service in the Austin, Texas area -- while cleaning offices (such as medical
facilities), the conspirators looted those workplaces of personal
identification information, which was then used to file fraudulent tax returns
and credit card applications. The intended loss of the fraud conspiracy was
approximately $3.9 million dollars. Alu and Ismail pled guilty and were
respectively sentenced to eight and seven years in prison and ordered to
jointly and severally pay $1,358,489 in restitution. Arrest warrants are still
out for Nigerian national co-defendants Dele Akanbi (aka "SK") and George
Najomo.
Gainesville man charged with bilking his former
brokerage firm clients with biofuel scheme (DOJ
Press Release)
Former Metlife Securities Inc. and Prudential employee Winston Wade Turner was
indicted by a federal grand jury in the United States District Court for the
Northern District of Georgia on mail and wire fraud. Turner pled not guilty to
charges that he represented to investors (who were former clients) that he was
a broker for "North American Bio Fuel," allegedly a biofuel producer that
Turner characterized as "up and coming company" and already producing biofuel.
During the time of the alleged representations, prosecutors assert that the
company was only a shell company. The Indictment alleges that Turner
caused, and attempted to cause, wire transfers in the hundreds of thousands of
dollars from victims and that he misused investor funds for personal and other
corporate purposes.