Securities Industry Commentator by Bill Singer Esq WEEK IN REVIEW
June 9, 2018
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In today's Securities Industry Commentator feed:
SEC Obtains Preliminary Injunction in Fraudulent Coin Offering Scheme (SEC Litigation Release No. 24160) The SEC filed a Complaint in the United States District Court for the Central District of California charging Titanium Blockchain Infrastructure Services Inc., President Michael Alan Stollery, a/k/a Michael Stollaire with lying about doing business with the Federal Reserve and firms such as PayPal, Verizon, Boeing, and The Walt Disney Company in connection with efforts to raise about $21 million in what was alleged to be a fraudulent initial coin offering. The Court granted the SEC's application for a temporary restraining order and orders freezing assets and other emergency relief. The Complaint also charged another Stollaire company, EHI Internetwork and Systems Management Inc.
SEC ALJ Denies Disqualification of Wedbush Lawyer (BrokeAndBroker.com Blog) Big problems often arise from small problems -- it's the mushroom effect. How often have you found yourself in a mess that you never quite saw coming? When you trace your steps back to see where it all went wrong, you often come to rest at some mundane, innocuous moment. In an ongoing SEC administrative proceeding, Ground Zero appears to have been nothing more than a lawyer representing a brokerage firm and its employee during a customer arbitration. As it developed, the employee had engaged in some misconduct, which gave rise to allegations that the firm had failed to supervise her, which gave rise to the SEC initiating administrative proceedings against the firm. As that supervisory case makes its way through the SEC, lo and behold, the federal regulator seeks to disqualify the lawyer who represented both the firm and the employee during the customer arbitration -- the firm wants that same lawyer to defend it against the SEC's charges. Is the lawyer conflicted? Did the employee previously waive any future conflicts? Should the lawyer be allowed to cross examine his former client? All that and more shall be revealed on the pages of today's BrokeAndBroker.com Blog
Harrisburg Financial Services Consultant Sentenced to Prison for Causing $374,000 in Illegal Transfers to His Bank Accounts (DOJ Press Release) Federal prosecutors alleged that William Simon Sullivan, Jr., who had worked as a consultant for Triangle Payroll Services, Inc.,used the CyberPay software program from January 12, 2013, and continuing to January 24, 2014, to defraud TPS and its clients by fraudulently causing over $374,000 to be transferred via wire transfers from TPS' bank accounts and its clients to Sullivan's personal bank accounts. Following his conviction on wire fraud and damaging a computer, Sullivan was sentenced in the United States District Court for the Western District of New York to 41 months in prison and three years supervised release and ordered to pay $374,198.73 in restitution.
Securities Industry Commentator: A legal, regulatory, and compliance feed curated by veteran Wall Street lawyer Bill Singer
http://www.rrbdlaw.com/4016/securities-industry-commentator/
In today's Securities Industry Commentator feed:
California Attorney Convicted by Massachusetts Jury of Securities Fraud in Scheme to Manipulate Stock of Two Companies (SEC Litigation Release No. 24159) Attorney Jehu Hand was convicted in the United States District court of the District of Massachusets on charges of securities fraud, wire fraud, and conspiracy to commit those offenses in connection with two pump-and-dump schemes that defrauded investors in Greenway Technology (company purporting to develop resorts for gay and lesbian travelers) and Crown Marketing. He will be sentenced by the court at a later date. An SEC Complaint is pending.
In today's BrokeAndBroker.com Blog we watch a Wall Street career short-circuit, fizzle, and burn out following allegations that the registered person was charged with felonies for using gift cards procured from stolen information. As much as we would like to dismiss this as a very rare and isolated scenario, FINRA continues to publish settlements involving similar fact patterns. Enough is not always enough. An honest living is not always the goal. In the end, it's hard to understand what motivates someone to stray off the path when the consequences are so onerous and the benefits seem absurdly paltry.
SEC Seeks Emergency Relief Against Equipment Leasing Company and its Founder in $80 Million Fraud (SEC Litigation Release No. 24158) The Securities and Exchange Commission filed a Complaint in the United States District Court for the Central District of California charging equipment leasing company Essex Capital Corporation and its founder, Ralph T. Iannelli with defrauding investors in connection with sales of over $80 million in promissory notes. READ the FULL TEXT SEC Complaint
Utah Financial Advisor Sentenced To Prison For Tax Evasion, Securities Fraud And Wire Fraud (DOJ Press Release) Henry Brock plead guilty to tax evasion, securities fraud and wire fraud and was sentenced in the United States District Court for the District of Utah and was sentenced to 72 months in prison plus three years of supervised release, and ordered to pay $12 million in restitution. Brock marketed and sold over $10.8 million worth of "IRA Exit Strategy" as a way for investors to avoid paying taxes on IRA withdrawals, which would otherwise be subject to Internal Revenue Service penalties and taxes. Brock caused clients to file fraudulent income tax returns claiming a total of approximately $3.8 million in bogus business losses and resulting in a tax loss of over $1.1 million.
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In today's Securities Industry Commentator feed:
SEC Charges "Whale Whisperer" Musician and His Companies for Defrauding Investors in Fraudulent "Soundwave" Investment Offerings (SEC Litigation Release No. 24156) In a Complaint filed in the United States District Court for the Northern District of Texas, the SEC alleged that Paul Gilmanand his alleged companies Oil Migration Group LLC, Wavetech29 LLC, and GilmanSound LLC,violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder; and the SEC seeks permanent injunctions, disgorgement, and civil penalties. READ the FULL TEXT Complaint.
SEC Modernizes the Delivery of Fund Reports and Seeks Public Feedback on Improving Fund Disclosure (SEC Press Release 2018-103) The SEC seeks input from mutual funds, ETFs, and other fund investors about improving fund disclosure and sought feedback on the fees that intermediaries charge for delivering fund reports. READ the FULL TEXT
The Imposter, The Signature, The Unregistered Associate, and a FINRA Bar (BrokeAndBroker.com Blog)In today's BrokeAndBroker.com Blog we come upon the sad tale of an unregistered associate who sought to go the extra step -- the extra mile -- in terms of customer service. When a brokerage customer encountered delays in transferring his account, the associate did what she needed to do in order to break the logjam. In hindsight, she was a tad over zealous. Making matters worse, she lied to FINRA. Alas, it does not end well.
Former head of Sandusky business charged with defrauding investors out of $10 million (DOJ Press Release) Jared J. Davis was indicted in the United States District Court for the Northern District of Ohio n multiple charges including conspiracy to commit wire fraud, conspiracy to launder money, wire fraud, money laundering and obstruction of justice a allegedly fraudulent binary options investment scheme that operated between 2012 and 2016 through Erie Marketing LLC and used trade names, including OptionMint, OptionKing and OptionQueen.
The Indictment alleges that Davis' binary options businesses were not registered with the Securities and Exchange Commission nor the Commodity Futures Trading Commission; instead, Davis took the opposing position on each trade, which created a conflict of interest whereby he only made money if his investors lost. Davis allegedly solicited victims through Internet marketing campaigns and call centers and he enlisted foreign nationals who, under Davis' direction, created a web of foreign corporations in the United Kingdom, Belize, Anguilla, Costa Rica, St. Vincent and the Grenadines and St. Maarten to allegedly receive and launder the victims' deposits.
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In today's Securities Industry Commentator feed:
Societe Generale S.A. Agrees to Pay $860 Million in Criminal Penalties for Bribing Gaddafi-Era Libyan Officials and Manipulating LIBOR Rate / Bank admits to making over $90 million in corrupt payments; Acknowledges manipulation of global benchmark interest rate, impacting financial products traded worldwide (DOJ Press Release) Societe Generale S.A. and its wholly owned subsidiary, SGA Societe Generale Acceptance N.V., agreed to pay a combined total penalty of more than $860 million to resolve charges with criminal authorities in the United States and France, including $585 million relating to a multi-year scheme to pay bribes to officials in Libya and $275 million for its manipulation of the London InterBank Offered Rate (LIBOR). SGA Societe Generale Acceptance N.V. is scheduled to plead guilty in connection with the resolution of the foreign bribery case and Societe Generale will enter into a deferred prosecution agreement in the United States District Court for the Eastern District of New York in connection with the resolution of the foreign bribery case. Together with approximately $475 million in regulatory penalties and disgorgement that Societe Generale has agreed to pay to the Commodity Futures Trading Commission (CFTC) in connection with the LIBOR scheme, the total penalties to be paid by the bank exceed $1 billion. READ the FULL TEXT CFTC ORDER
SEC Charges Investment Adviser and Two Former Managers for Misleading Retail Clients (SEC Press Release 2018-101) The SEC alleges investment adviser deVere USA failed to disclose agreements with overseas product and service providers that resulted in compensation being paid to the firm and an overseas affiliate that created an incentive for the firm to recommend a pension transfer and particular product or service providers that were obligated to make payments. In settling with the SEC, deVere USA, Inc. agreed to pay an $8 million civil penalty. Separately, the SEC filed a Complaint in the United States District Court for the Southern District of New York against former deVere USA CEO, Benjamin Alderson, and a former manager, Bradley Hamilton alleging that they misled clients and prospective clients about the benefits of pension transfers while concealing material conflicts of interest, including the substantial compensation that Alderson and Hamilton personally stood to receive. READ the FULL TEXT SEC Order and SEC SDNY Complaint
GrandFund In A FINRA Grand Funk (BrokeAndBroker.com Blog) A little known and fairly useless fact is that in 1971, rock band Grand Funk Railroad (which is to be confused with the same band by the name of Grand Funk) sold out 55,000 seats at Shea Stadium in 72 hours whereas the Beatles' 1965 Shea concert took weeks to sell out. What does that have to do with Wall Street regulation? Frankly, I think the connection is fairly obvious. If you don't quite see it, though, please read today's BrokeAndBroker.com Blog.
Court Enters Judgment Against Former Trading Instructor for Defrauding Private Fund Investors (SEC Litigation Release No. 24154) In a Complaint filed in the United States District Court for the Western District of North Carolina, the SEC alleged that between at least April 2010 and at least August 2015, former options trading instructor Gustavo A. Guzman, solicited over $2.1 million from investors for a purported equity options fund and a real estate fund that he managed. The Complaint alleges that Guzman misappropriated about a third of the proceeds for personal expenses and Ponzi-like payments. The Court entered a default judgment against Guzman permanently enjoining him and ordering him to pay disgorgement of $253,820, prejudgment interest of $25,169, and a civil penalty of $160,000.
Orange County Commodities Trader Sentenced to over 10 Years in Prison in Scheme that Took $1.6 Million from Investors (DOJ Press Release) Federal prosecutors alleged that during a 3 1/2 year period ending in May 2016, Rawle Gerard Suite a/k/a "Jerry Snead" and other aliases engage concealed his true identity from investors and used a series of companies with names such as STA Opus, TBT Analysis LLC, and Another Winning Trade through which investors lost about $1.6 million in a bogus commodities trading program. Suite was a registered commodity trading advisor and commodity pool operator from late 1985 until May 3, 1990, when his registration was revoked. Since then, he was targeted twice by the California Department of Corporations, which in 2012 obtained a $2.5 million judgment against Suite, in part for violating a prior order issued by the agency. Suite pled guilty in the United States District Court for the Central District of California to four counts of wire fraud and was sentenced to 121 months in federal prison.
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In a NAL to the Investment Company Institute, the SEC's Division of Investment Management states that it would not recommend enforcement action against a mutual fund or its SEC-registered transfer agent under Section 22(e) of the Act if, the transfer agent, acting on behalf of the mutual fund, temporarily delays for more than seven days the disbursement of redemption proceeds from the mutual fund account of a Specified Adult held directly with the transfer agent based on a reasonable belief that financial exploitation of the Specified Adult has occurred, is occurring, has been attempted, or will be attempted. READ the FULL TEXT NAL and the initiating letter.
2 Lies To FINRA Add Up To 1 Bar (BrokeAndBroker.com Blog)
With some folks, it just seems that their luck runs out. After a remarkable run beset with almost losing one's balance, almost falling down, almost getting hit by a falling something or other, almost not getting over an obstacle -- at some point, it ends short of the finish line. No prize. No trophy. Just another also-ran. In today's BrokeAndBroker.com Blog we look back on the career of one stockbroker who almost made it through the Wall Street obstacle course. Perhaps figuring he had several cat lives left, our contestant lied to FINRA and then lied to that regulator again. Not a smart idea the first time. Not a smart idea the second time.
SEC Charges 13 Private Fund Advisers for Repeated Filing Failures (SEC Press Release 2018-100) Bachrach Asset Management Inc.; Biglari Capital LLC; Brahma Management Ltd.; Bristol Group Inc.; CAI Managers & Co. L.P.; Cherokee Investment Partners LLC; Ecosystem Investment Partners LLC; Elm Partners Management LLC; HEP Management Corp.; Prescott General Partners LLC; RLJ Equity Partners LLC; Rose Park Advisors LLC; and Veteri Place Corp. settled with the SEC in response to the federal regulator's allegations that the 13 registered investment advisers ("RIAs") had failed to file annual reports on Form PF about the private funds they advise, including the amount of assets under management, fund strategy, performance, and use of borrowed money and derivatives; and that each RIA was delinquent in their filings over multi-year periods. Without admitting or denying the findings, the advisers agreed to be censured, to cease and desist, and to each pay a $75,000 civil penalty. During the course of the SEC's investigation, the advisers also remediated their failures by making the necessary filings. READ the FULL TEXT Orders.