Securities Industry Commentator by Bill Singer Esq

[F]rom November 2011 through mid-2014, White ran the Broward-based moving business' call center that booked moves throughout the Southeast.  He also oversaw a "phone room" out of his corporate offices to raise money from investors.  During telephone calls, White and his co-conspirators used false statements, manipulation, and high-pressure tactics to target elderly investors (victims) and their retirement money.  The victims included retired teachers, farmers, small business owners, and homemakers, from across the United States.  When his targets did not have available funds to invest, White tricked them into converting their Individual Retirement Account ("IRA") money and transferring the funds to his corporate bank account.  White promised his investors that their money was safe and secure, would be returned after a year, and yield high-value interest payments to be paid on a monthly basis.  White and his co-conspirators provided written and oral "Investor Reports" that falsely conveyed security and profitability of the First Call Ventures moving business.  As a result, White and his conspirators were given a total of more than $2 million from over a dozen senior citizens.

In truth and fact, White and his partners used the investors' money for themselves, including millions in cash and bank check payments.  Bank records also demonstrated that over the course of the fraud scheme, White withdrew over $130,000 in investor proceeds at the Seminole Coconut Creek casino.  White and his partners siphoned all profits and victim money to their own personal accounts, declared a $1.8 million "loss," and shuttered the business.  As a result of the fraudulent scheme, some of the senior citizens are now living on food stamps, lost their homes, or were forced to take on odd jobs for income. 

Four other individuals tied to this case and a related indictment previously pled guilty.  White's co-defendants, John Kevin Reech, 56, of Delray Beach, Florida, and Joseph Mario Genzone, 53, of Boca Raton, Florida, previously pled guilty.  Genzone and Reech were also recently charged by Information for operating a separate offering fraud (Case No. 18-80193-CR-Bloom).  Reech pled guilty in both matters and was sentenced to a concurrent term of 51 months in prison.  Genzone also pled guilty and is scheduled to be sentenced by Judge Bloom on December 21, 2018, in both cases.  Daniel Joseph Touizer, 44, of Aventura, Florida was sentenced to 68 month in prison for leading a similar fraud scheme linked to White and Reech's criminal conduct (Case No. 17-60286-CR-Bloom).  Saul Daniel Suster, 66, of Sunny Isles Beach, Florida, a phone room worker of Touizer's, was sentenced to 30 months in prison. 

1. These proceedings arise out of BNY Mellon's improper practices involving the pre-release of American Depositary Receipts ("ADRs").

2. Sponsored ADR facilities, which provide for the issuance of ADRs, are established by a depositary bank (the "Depositary"), such as BNY Mellon, pursuant to a deposit agreement ("Deposit Agreement"). For unsponsored ADR facilities, ADRs are issued pursuant to the terms and conditions of the ADR. 

3. As part of its role, a Depositary issues ADRs to a market participant that has delivered the corresponding number of foreign securities to the Depositary's foreign custodian ("Custodian"). However, in certain situations, Deposit Agreements may provide for "prerelease" transactions in which a market participant can obtain newly issued ADRs from the Depositary before delivering ordinary shares to the Custodian. Only brokers (or other market participants) that have entered into pre-release agreements with a Depositary ("Pre-Release Agreements") can obtain pre-released ADRs from the Depositary. The Pre-Release Agreements, consistent with the Deposit Agreements, require the broker receiving the pre-released ADRs ("Pre-Release Broker"), or its customer on whose behalf the Pre-Release Broker is acting, to beneficially own the ordinary shares represented by the ADRs, and to assign all beneficial right, title, and interest in those ordinary shares to the Depositary while the pre-release transaction is outstanding. In effect, the broker or its customer becomes the temporary custodian of the ordinary shares that would otherwise have been delivered to the Custodian. 

4. Contrary to how pre-release transactions were supposed to work, BNY Mellon at times pre-released ADRs to Pre-Release Brokers in circumstances where BNY Mellon was negligent with respect to whether the Pre-Release Brokers, or the parties on whose behalf the pre-released ADRs were being obtained, actually beneficially owned the corresponding number of ordinary shares, as they represented to BNY Mellon in their Pre-Release Agreements. The result of this conduct was the issuance of ADRs that in many instances were not backed by ordinary shares as required by the ADR facility.This conduct violated Section 17(a)(3) of the Securities Act.

From 2000 to 2016, BENENFELD was the branch manager at a branch of a New York-area bank ("Bank-1").  Beginning in or about 2004 and continuing into 2016, while employed at Bank-1, BENENFELD conducted hundreds of unauthorized transactions involving the accounts of over 20 bank customers, including the accounts of BENENFELD's relatives.  BENENFELD made unauthorized draws on, and payments to, the customers' lines of credit; made unauthorized withdrawals from, and deposits to, the customers' deposit accounts; and used the customers' deposit accounts as collateral for other customers' lines of credit without authorization.  To effect the unauthorized transactions, BENENFELD, among other things, forged the signatures of bank customers and used a document previously signed by a bank customer to create paperwork that falsely purported to authorize a different transaction.  In or about April 2016, after having discovered BENENFELD's conduct, Bank-1 terminated BENENFELD's employment.  In or about June 2016, BENENFELD was hired by another New York-area bank ("Bank-2").  At Bank-2, BENENFELD continued to conduct unauthorized transactions involving customer accounts.  As a result of the unauthorized transactions conducted by BENENFELD, Bank-1 sustained losses of over $5 million.

FINRA found that, from January 2004 to April 2017, UBSFS processed thousands of foreign currency wires for billions of dollars, without sufficient oversight. UBSFS's AML surveillance systems failed to reasonably monitor billions of dollars in foreign currency wires flowing through customer accounts, including hundreds of millions of dollars in foreign currency wires to and from countries known to be at high risk for money-laundering. For example, for foreign currency wires to and from certain accounts, UBSFS's AML surveillance systems did not capture the number and identity of customers, the number and dollar value of the transfers, whether the transfers involved third parties and whether the transfers involved countries known for money-laundering risk. UBSFS's failure to monitor these high-risk transactions went undetected for more than eight years until discovered in 2012, and the firm failed to implement a reasonable system until April 2017.

With respect to UBSS, FINRA found that, from January 2013 to June 2017, the firm failed to reasonably monitor penny stock transactions that its Swiss parent routed to UBSS for execution through an omnibus account. During this time, UBSS facilitated the purchase or sale of more than 30 billion shares of penny stocks valued at over $545 million through the omnibus account for undisclosed customers.

Florida Man Pleads Guilty in $28 Million Solar Farm Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-mdtn/pr/florida-man-pleads-guilty-28-million-solar-farm-ponzi-schemeThe former founder and Chief Investment Officer of Clean Energy Advisors (CEA), Christopher B. Warren, pled guilty in the United States District Court for the Middle District of Tennessee to one count of mail fraud and one count of securities fraud for operating a $28 million Ponzi scheme. CEA recruited 60 investors for its private investment funds: Utility Solar IV and Utility Income Fund. In soliciting those investors, Warren claimed that CEA owned working solar farms and that Duke Power had agreed to purchase the energy produced by those farms. In furtherance of his fraud, Warren created phone audited financial statements and made regular Ponzi payments to select investors. 

• Securities Industry Commentator
• Bill Singer