The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
October 12, 2018
https://www.justice.gov/usao-sdny/pr/william-mcfarland-sentenced-6-years-prison-manhattan-federal-court-engaging-multiple
You've probably read about this case or seen it unfold on television. William McFarland was the founder and Chief Executive Officer of Fyre Media Inc., which was supposed -- and I cannot emphasize enough "supposed" -- to build a digital application that would allow individuals organizing commercial events, such as concerts, to bid for artist and celebrity bookings at such events. Nice, clever idea; unfortunately, it turned out to be a scam resulting in 80 victim-investors losing over $24 million dollars. Then there were the shenanigans of subsidiary Fyre Festival LLC, which was supposed (yeah, that word again) to organize a two-week music festival in the Bahamas.
It all ended dramatically and badly. McFarland lied to investors about revenues and income and purported venture capital investments into the companies. That two-week festival never came off. As the noose tightened around McFarland, he lied to federal law enforcement during an in-person interview, which, as you can imagine, ain't a great idea. Eventually, finding no place to run to and no place to hide, McFarland pled guilty in the United States District Court for the Southern District of New York to one count of wire fraud in connection with a scheme to defraud over 80 investors in Fyre Media and Fyre Festival LLC of over $24 million, and one count of wire fraud in connection with a scheme to defraud a ticket vendor for the Fyre Festival of $2 million. McFarland was sentenced to 6 years in prison plus 3 years of supervised release; and ordered to pay a $500 special assessment and forfeit $26,191,306.28. READ the FULL TEXT DOJ Release for the enthralling details of this case. https://www.justice.gov/usao-sdny/pr/william-mcfarland-sentenced-6-years-prison-manhattan-federal-court-engaging-multiple
SEC Stops Fraudulent ICO That Falsely Claimed SEC Approval (SEC Release 2018-232)
https://www.sec.gov/news/press-release/2018-232
In a Complaint filed in the United States District Court for the Southern District of California, the SEC alleged that Blockvest LLC falsely claimed its Initial Coin Offering and its affiliates received regulatory approval from various agencies, including the SEC. In violatio of federal law, Blockvest and its founder Reginald Buddy Ringgold III (a/k/a Rasool Abdul Rahim El) alleged used the SEC seal without permission; and they falsely claiming their crypto fund was "licensed and regulated." Ringgold allegedly promoted the ICO with a fake agency he created called the "Blockchain Exchange Commission," using a graphic similar to the SEC's seal and the same address as SEC headquarters. Despite having received a Cease-And-Desist letter from the National Futures Association, Blockvest and Riggold allegedly persisted in using NFA's seal and made false claims about their status with that organization. The Court issued an emergency Order prohibiting Blockvest and Ringgold from violating the antifraud provisions and securities registration provisions. Finally, the Order halting a planned initial coin offering (ICO), which backers falsely claimed was approved by the SEC. The Order halts the planned ICO and any ongoing pre-ICO sales by Blockvest or Ringgold.
READ the FULL TEXT Complaint https://www.sec.gov/litigation/complaints/2018/comp-pr2018-232.pdf
SEC Obtains Preliminary Injunction in Alleged $345 Million Fraud (SEC Litigation Release No. 24313)
https://www.sec.gov/litigation/litreleases/2018/lr24313.htm
https://www.sec.gov/litigation/litreleases/2018/lr24313.htm
In a Complaint filed in the United Sttates District Court for the District of Maryland, the SEC alleged that Kevin B. Merrill, Jay B. Ledford, Cameron Jeziersk promised investors significant profits from the purchase and resale of consumer debt portfolios; however, the defendants purportedly used the funds to make Ponzi-like payments to earlier investors, and stole at least $85 million. Defendants were charged with violations of the antifraud provisions of Section 17 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks disgorgement of allegedly ill-gotten gains and prejudgment interest, and financial penalties against the defendants. The Court entered a preliminary injunction against defendants, and several entities they control.
Customer Seeks $2 Million In Puerto Rico Bond Arbitration (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4224/finra-puerto-rico-bonds/
If you've been following Puerto Rico's financial crisis, you know that the Commonwealth's bonds are worth about the paper that they were printed on, but for the fact that there are liens on the paper and pending judgments on the ink. Some folks knew that they were investing in junk, however, and paid pennies for what they hoped would be dollars in returns. They knew the risks. They accepted it in consideration of the pay-off. Other folks bought what they were sold in the form of tax-advantaged debt from the purportedly venerable Commonwealth: turned out to be dollars invested into what may pay pennies. In today's featured FINRA arbitration, we got an unhappy customer who is seeking at least $2 million in damages from her Puerto Rico bond investments. It sort of seems like a slam dunk win. Then again, wasn't that how the bonds were marketed?
Fugitive Lawyer Pleads Guilty in Connection with $21 Million Fraud Scheme (DOJ Release)
https://www.justice.gov/usao-sdfl/pr/fugitive-lawyer-pleads-guilty-connection-21-million-fraud-scheme
https://www.justice.gov/usao-sdfl/pr/fugitive-lawyer-pleads-guilty-connection-21-million-fraud-scheme
Michael R. Casey, James C. Howard, Patricia S. Saa, and Louis N. Gallo, III obtained $21 million from over 770 investors via sales of shares of ownership in Commodities Online LLC ("COL"); subscriptions to access the COL website and COL's investment opportunities; and investments in purported transactions to buy and sell commodities, such as fish, iron ore and sugar. Howard, who was initially the President of COL, was arrested for a state fraud offense and stepped down., which resulted in Casey, who was initially outside counsel to COL, becoming the President of COL; however, Casey and his co-conspirators represented to investors that Howard was no longer managing COL, when in fact, Howard remained in charge. Also, Casey and his co-conspirators did not disclose to investors that both Howard and Gallo had previously been convicted of felonies. In an Indictment filed in the United States District Court for the Southern District of Florida, Casey, Howard, Saa, and Gallo,were charged with one count of conspiracy to commit mail and wire fraud, and several counts of mail and wire fraud. Howard, Saa, Gallo, and another defendant, Rita Balbirer, were also charged with conspiracy to commit money laundering and various counts of money laundering. Casey failed to appear at a status conference and was indicted for bond jumping; and four years later, he pled guilty failing to appear in court, and also to one count of conspiracy to commit mail and wire fraud. Howard pled guilty to one count of conspiracy to commit mail and wire fraud, and was sentenced to 189 months in prison. Gallo pled guilty to one count of conspiracy to commit mail and wire fraud, and was sentenced to 168 months in prison. Balbirer pled guilty to two counts of money laundering, and was sentenced to 17 months in prison. Additional co-conspirators pled guilty for their involvement in the scheme and were sentenced as follows: Timothy Josselson to 38 months in prison; Kathryn Josselson to 36 months in prison; and Robert Lananna to 40 months in prison.
Opening Statement at the SEC Open Meeting by Chairman Jay ClaytonStatement on Re-Opening Comment Period for Capital/Margin/Segregation for Security-Based Swap Dealers by Commissioner Robert J. Jackson Jr.