Securities Industry Commentator by Bill Singer Esq WEEK IN REVIEW
June 2, 2018
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In today's Securities Industry Commentator feed:
SEC Charges Investment Banker in Insider Trading Scheme (SEC Press Release 2018-97) In a Complaint filed in the United States District Court for the Southern District of New York, the SEC charged Woojae "Stever Jung, a Vice President of Investment banking, with fraud in connection with his alleged use of his investment bank employer's confidential information to engage in insider trading involving deals for which the bank provided advisory services. The SEC seeks disgorgement, pre-judgment interest, penalties, and injunctive relief. The complaint also names Jung's friend, Sungrok Hwang, as a relief defendant. Separately, the United States Attorney's Office for the Southern District of New York unsealed criminal charges against Jung. READ the FULL TEXT SEC Complaint NOTE: Press reports identify Jung as a former vice president at Goldman Sachs Group Inc.
Feuding Stockbrokers Set Stage For Expungement Of Cookie Cutter Customer Complaints (BrokeAndBroker.com Blog) One stockbroker, five customers, four complaints: That's the setting for today's Wall Street expungement drama. Add a simmering feud between two former stockbroker partners. Toss in a wife. Toss in a mother and father. Introduce one helluva an industry lawyer. Appoint a FINRA Arbitrator who was on top of her game. Shake. Stir. Cook. Serve.
Former Auditor Pleads Guilty To Submitting Fraudulently Backdated Documents To The Securities And Exchange Commission (DOJ Press Release) Former auditor and owner of a registered public accounting firm Terry Johnson pled guilty to an Information in the United States District Court for the Southern District of New York to one count of submitting false records in an investigation of a matter within the jurisdiction of a federal agency. READ A FULL TEXT Copy of the Information. The plea was in connection with allegations that Johnson had knowingly submitting falsely backdated documents to the United States Securities and Exchange Commission ("SEC") during the regulator's investigation into his auditing practices. Also READ: In the Matter of Terry L. Johnson, CPA, Respondent. (Order Instituting Administrative and Cease-And-Desist Proceedings, Making Findings, Imposing Sanctions; '33 Release No. 9915; '34 Release No. 75944; Acct. Audit. Enf. Release No. 3698; Admin. Proc. File No. 3-16820 / September 17, 2015)
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In today's Securities Industry Commentator feed:
SEC Charges Long Island Investment Professional in $8 Million Scam Targeting Long-Standing Brokerage Customers (SEC Litigation Release No. 24152) The SEC charged Steven Pagartanis in the United States District Court for the Eastern District of New York with The violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder;. The SEC sought a judgment ordering Pagartanis to disgorge his ill-gotten gains plus prejudgment interest, and to pay financial penalties. The Complaint alleges that Pagartanis, formerly affiliated with a registered broker-dealer, promised investors that he would invest their funds in either a publicly-traded or private land development company, and that their investment would be safe and would pay guaranteed monthly interest. The Complaint alleges that Pagartanis raised about $8 million, which he used to pay personal expenses and make Ponzi-like guaranteed "interest" payments to his customers. The Suffolk County District Attorney's Office today filed criminal charges against Pagartanis.READ THE FULL TEXT SEC Complaint
FINRA Settles UIT And Instant Messaging Case (BrokeAndBroker.com Blog) BrokeAndBroker.com Blog readers know that our publisher Bill Singer Esq. is no fan of self-regulation or of Wall Street's leading self-regulatory-organization, the Financial Industry Regulatory Authority. Bill's critiques, criticisms, concerns, and reservations aside, today is a rare day for the pages of the BrokeAndBroker.com Blog because Bill does not come to bury FINRA but to praise it! A recent FINRA AWC regulatory settlement shows how self-regulation should work and also shows how FINRA is capable of rising to the occasion. At issue in the settlement is a member firm's handling of sales of unit investment trusts and an electronic messaging system. Not the most exciting of regulatory and compliance issues but certainly the day-to-day stuff of Wall Street regulation and compliance. FINRA published a settlement document that uses plain English to explain the background and underlying events. Thereafter, FINRA builds a compelling case and justifies its sanctions, which are measured and appropriate. Maybe FINRA CEO Robert Cook is slowly turning the battleship of self-regulation? Alas . . . only time will tell. Be that as it may, Bill urges all serious investors and industry professionals to read today's analysis of FINRA's settlement.
In the Matter of the Continued Membership of Windsor Street Capital, L.P. (f/k/a Meyers Associates, L.P.) (FINRA NAC, SD-2172 / May 14, 2018) As set forth under the heading "Introduction" in FINRA's National Adjudicatory Council's ("NAC's") Decision, Windsor Street failed to meet its burden of demonstrating that its continued membership in FINRA is in the public interest. On May 17, 2018, Windsor Street filed an appeal of FINRA's Decision with the SEC and sought a 45-day stay of the self-regulatory-organization's denial of the firm's membership continuance in order to allow the firm to wind down its activities. FINRA opposed the delay. In the Matter of the Application of Windsor Street Capital, L.P. For Review of Action Taken by FINRA (Order Denying Stay, '34 Act Rel. No. 83340; Admin. Proc. File No. 3-18494 / May 29, 2018). The SEC denied the requested stay.
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In today's Securities Industry Commentator feed:
In the Matter of Alexander Kon (Order Making Findings and Imposing Remedial Sanctions and a Cease-and-Desist; '33 Act Release No. 10501; '34 Act Release No. 83336; Admin. Proc. File No. 3-17674 / May 29, 2018) On November 14, 2016, the SEC instituted public administrative proceedings against Alexander Kon, and without admitting or denying the findings, Kon submitted an Offer of Settlement, which the SEC accepted. The SEC deemed that Kon had willfully violated Section 17(b) of the Securities Act. The Order asserts in part that in early 2014, Issuer A's former CEO retained Kon to disseminate information about Issuer A. The Former CEO and Kon allegedly agreed that for $25,000, Kon would run a marketing campaign on Issuer A stock. In accordance with the terms of the settlement, the SEC ordered Kon to cease and desist from committing or causing any violations and any future violations of Section 17(b) of the Securities Act; and suspended him for twelve months from participating in any offering of a penny stock, including: acting as a promoter, finder, consultant, agent or other person who engages in activities with a broker, dealer or issuer for purposes of the issuance or trading in any penny stock, or inducing or attempting to induce the purchase or sale of any penny stock. Finally, Kon was ordered to pay $25,000 disgorgement, $332 interest and a $20,000 civil money penalty.
SEC Obtains Emergency Order Halting Fraudulent Coin Offering Scheme / Charges "Blockchain Evangelist" Behind Alleged Scam (SEC Release 2018-94) In a Complaint filed in the United States District Court for the Central District of California ("CDCA"), the SEC alleged that Titanium Blockchain Infrastructures Services Inc. President Michael Alan Stollery, a/k/a Michael Stollaire, a self-described "blockchain evangelist," lied about business relationships with the Federal Reserve and dozens of firms, including PayPal, Verizon, Boeing, and The Walt Disney Company. SEC v. Titanium Blockchain Infrastructure Services, Inc., et al. (Compliant, CDCA, No. 18-4315). Stollaire and Titanium are charged with violating the antifraud and registration provisions of the federal securities laws; EHI Internetwork and Systems Management Inc., is also charged with violating the antifraud provisions. The Complaint seeks preliminary and permanent injunctions, return of allegedly ill-gotten gains plus interest and penalties, and a Bar against Stollaire to prohibit him from participating in offering digital securities in the future. Following the court's entry of a temporary restraining order against them, Stollaire and his companies consented to the entry of a preliminary injunction and the appointment of a permanent receiver over Titanium. CDCA approved an emergency asset freeze and the appointment of a receiver for Titanium.READ the FULL TEXT SEC Complaint
Ameriprise Rep Barred For Unauthorized Mutual Fund Trades (BrokeAndBroker.com Blog) In today's BrokeAndBroker.com Blog we consider the case of a former Ameriprise stockbroker accused of entering 30 unauthorized mutual fund purchases valued at some $260,000. Her brokerage firm seems to have been on top of its compliance duties, and busted the trades. FINRA seems to have been on top of its regulatory duties, and demanded answers. The stockbroker ducked FINRA and was suspended and then barred for her dilatory conduct but -- Eureka! -- after some eight months of playing regulatory hide-and-seek, she gets FINRA to lift the bar when she finally cooperates. And after her belated cooperation, go figure, she winds up barred.
CFTC Orders X-Change Financial Access LLC to Pay a $150,000 Civil Monetary Penalty for Supervisory and Recordkeeping Failures (CFTC Release 7735-18) CFTC issued an Order filing and simultaneously settling charges against X-Change Financial Access LLC (XFA) for failure to diligently supervise its employees' handling of its customer accounts and failure to preserve complete records. At the time of the conduct charged, XFA was registered with the CFTC as a Futures Commission Merchant and is now registered as an Introducing Broker. The CFTC Order requires XFA to pay a $150,000 civil monetary penalty and to cease and desist from further violations of the Commodity Exchange Act. READ the FULL TEXT CFTC ORDER
South Florida Resident Pleads Guilty to Impersonating a Member of the Saudi Royal Family / The Impersonation Scheme Involved Fake Diplomatic License Plates, Expensive Jewelry, Artwork, Wire Fraud, and International Trips (DOJ Press Release) On May 25, 2018, Anthony Gignac, a/k/a "Khaled Al-Saud," a/k/a "Khalid Al-Saud," a/k/a "Khalid Bin Al-Saud," a/k/a "Khalid Bin Sultan Al-Saud," a/k/a "Sultan Bin Khalid Al Saud," 47, of Miami, pled guilty in the United States District Court for the Southern District of Florida to one count of impersonating a foreign diplomat or foreign government official; one count of aggravated identity theft; and one count of conspiracy to commit wire fraud. Federal Prosecutors had alleged that Gignac and one of his co-conspirators created Marden Williams International LLC ("MWI"), which fraudulently sought financial investments, in part, by falsely presenting. Gignac as a member of the Saudi Royal family. One of the fraudulent investment schemes was purported to be a pre-initial private offering of a legitimate private Saudi Arabian business. One victim invested approximately $5,000,000 into the fraudulent scheme.
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In
today's Securities Industry Commentator
feed:
Hedge
Fund Founder Pleads Guilty To Fraud In Connection With Bribery Of Former
Correction Officers Union
Leader (DOJ Press Release) Platinum
Partners hedge fund founder Murray Huberfeld pled guilty in the United States
District Court for the Southern District of New York to one count of conspiracy
to commit wire fraud arising from conspiring with Jona Rechnitz to cause the
fund to pay $60,000 to Rechnitz's company by falsely representing that the
money was payment for eight New York Knicks court-side
tickets. Allegedly, Huberfeld knew that the payment was to reimburse Rechnitz
for having paid Norman Seabrook, then-president of the Correction Officer's
Benevolent Association for Seabrook's efforts to get the association to invest
millions of dollars in Platinum that included $15 million from a retirement
benefits program funded by the City of New York. Seabrook awaits
trial.
FINRA
Fines And Suspends Merrill Lynch Rep For Check Kiting
(BrokeAndBroker.com Blog) FINRA is on the Wall Street beach again watching high
flyin' kites -- or, put in more formal terms, we got another FINRA regulatory
settlement involving a former Merrill Lynch registered rep accused of check
kiting. In today's installment of FINRA seeking out the industry's NSF checks
and calling those to atone, we got five checks spread out over three months. No
. . . BrokeAndBroker.com Blog publisher Bill Singer ain't comin' to the defense
of the rep. It looks like the Respondent tried to do what he was accused of.
That being said, Bill still finds himself in another one of his foamy lathers
as he wonders why FINRA is so ready to play the collection agent for its member
firms -- or the local tough-guy enforcer -- yet FINRA doesn't seem as quick to
enter the fray when an affiliate bank of its larger member firms engages in
similar misconduct albeit on a larger scale and involving many more zeros
following the dollar
sign.