The Wall Street Legal & Regulatory Feed
Securities Industry Commentator by Bill Singer Esq
May 9, 2019
Ay, Ay, Ay, Ay . . . You're Going To Sing-Sing -- Don't Cry! Peruvian Man Pleads Guilty to Operating Spanish-Speaking Call Center that Threatened and Extorted U.S. Consumers (DOJ Release)
https://www.justice.gov/opa/pr/peruvian-man-pleads-guilty-operating-spanish-speaking-call-center-threatened-and-extorted-us
Following his extradition to the United States from Peru, Omar Portocarrero Caceres pled guilty in the United States District Court for the Southern District of Florida to extortion. As set forth in part in the DOJ Release:
Portocarrero and his co-conspirators in Peru contacted U.S. consumers, many of whom were elderly and vulnerable, using Internet-based telephone calls. Claiming to be attorneys and government representatives, the callers falsely told victims that they had failed to pay for or receive a delivery of products. The callers also falsely threatened victims with lawsuits, negative marks on their credit reports, imprisonment, or immigration consequences if they did not immediately pay for the purportedly delivered products and "settlement fees." Many victims made monetary payments based on these baseless threats.
https://www.justice.gov/opa/pr/six-men-charged-role-five-year-high-yield-investment-fraud-scheme
Cengiz Jan "CJ" Comu; John Mervyn Price; Harley E. "Buddy" Barnes, III; Richard Laurence Kadish; Richard Lawrence Green; and Daniel Thomas Broyles Sr., were charged with one count of conspiracy to commit mail and wire fraud, 10 counts of mail fraud and 10 counts of wire fraud. Broyles, who was previously indicted in the Western District of North Carolina for his role in another high-yield investment fraud scheme, also remains a fugitive. As set forth in part in the DOJ Release:
[B]eginning in 2013, Comu, Price, Barnes, Kadish, Green and Broyles conspired to sell stock in EarthWater, a United Kingdom company headquartered in Dallas County, Texas. EarthWater manufactured and sold bottled water that it claimed was infused with special minerals mined from an 80-million-year-old deposit hidden in a secret location.
According to the indictment, Comu, who is EarthWater's founder, chairman and chief executive officer, falsely represented to victim investors that he was a successful Wall Street veteran with decades of experience and did not disclose to investors that, among other things, he was permanently barred from selling unregistered securities as a result of actions filed by state and federal securities regulators.
The indictment further alleges that, to induce victims to purchase EarthWater stock, Comu, Price, Barnes, Kadish, Green, Broyles, and others made numerous false and misleading representations, including that victim investors only had a brief opportunity to purchase EarthWater stock for anywhere from $.10 to $.50 per share in an unregistered offering before EarthWater launched an initial public offering (IPO) or was acquired by a large well-known company and EarthWater's stock price would increase anywhere from 10- to 50- times the purchase price. In reality, EarthWater allegedly never initiated an IPO, or a merger or acquisition.
The indictment also alleges that defendants falsely represented to victim investors that EarthWater would use 90 percent of invested funds to grow its business and expand operations, and that any fees paid to broker-dealers with respect to the sale of EarthWater stock would not exceed 10 percent of the purchase price of the shares. In reality, Comu, Price and Barnes allegedly agreed to split victim investors' funds 50-50 with Kadish, Green, Broyles and other individuals who sold EarthWater stock. As a result, nearly half of all of the money victims invested in EarthWater allegedly went directly into the pockets of the individuals who sold them the stock.
In addition, according to the indictment, the defendants also falsely represented to victim investors that Comu, Price and Barnes did not receive salary from EarthWater in 2014, 2015 or 2016. In reality, Comu, Price and Barnes allegedly used EarthWater's investment account as a personal piggybank, using victim investor funds for their own personal benefit and transferring victim investor funds to bank accounts controlled by them for their own personal use.
GUEST BLOG: The Game of Coins by Aegis Frumento Esq (BrokeAndBroker.com Blog)
http://www.brokeandbroker.com/4580/aegis-frumento-games/
Inevitably blockchain miners will merge and consolidate in order to stay profitable; which means that the blockchain will have fewer, larger mining operations. What was meant to be a new, decentralized form of money lacking systemically important institutions has become a system completely controlled by just a handful of people. Inevitably, concentration leads to dominance, and dominance leads to oligopolistic and monopolistic practices. What was envisioned as too big to fail may just become too big and a failure.
Testimony before the Financial Services and General Government Subcommittee of the U.S. Senate Committee on Appropriations by SEC Chairman Jay Clayton (May 8, 2019)
https://www.sec.gov/news/testimony/testimony-financial-services-and-general-government-subcommittee-us-senate-committee
https://www.sec.gov/news/testimony/testimony-financial-services-and-general-government-subcommittee-us-senate-committee
As noted in part:
For FY 2020, our request of $1.746 billion, a 4.2 percent increase over the FY 2019 enacted levels, will allow the agency to carry out our mission to protect investors, maintain fair, orderly and efficient markets and facilitate capital formation. This funding level would support 4,694 positions, including 34 new positions. Along with the funding provided for 100 additional positions in FY 2019, the FY 2020 request will enable the SEC to fill approximately one-third of the approximately 400 positions lost due to the hiring freeze. The FY 2020 request also includes additional funding for information technology and cybersecurity upgrades to build on the agency's recent work to improve our systems and expertise. Finally, the FY 2020 budget request relies on the SEC having continued access to the Commission's Reserve Fund to fund multi-year information technology improvements, including those related to cybersecurity.
Bill Singer's Comment: Chair Clayton's remarks to the Senate omitted any comments about the SEC's dismal processing times for its Whistleblower docket. Pointedly, Congress should demand as part of its budgetary approval process some assurances that the SEC will address the growing chorus of complaints about its historic failure to timely approve WB-APP filings, and, thereafter, to implement policies that will ensure the prompt payment of awards. See, for example: "Whistleblower Challenges SEC Over Delay on Award Decision / Tipsters have grown frustrated with the length of time it has taken the regulator to determine whether a tip warrants a reward" (Wall Street Journal / April 30, 2019) https://www.wsj.com/articles/whistleblower-challenges-sec-over-delay-on-award-decision-11556668694; and SEC Published Comment at https://www.sec.gov/comments/s7-16-18/s71618-4239056-172917.pdf
Credit Suisse Loses Multi-Million Dollar Deferred Comp Arbitration. In the Matter of the Arbitration Between Joseph Todd Lerner and Anna Sarai Winderbaum, Claimants, v. Credit Suisse Securities (USA) LLC, Respondent (FINRA Arbitration Decision 17-00057)
http://www.finra.org/sites/default/files/aao_documents/17-00057.pdf
In a Statement of Claim filed in January 2017, associated person Claimants Lerner and Winderbaum asserted breach of contract, breach of the
implied covenant of good faith and fair dealing, conversion, unjust enrichment, false and
misleading Form U-5 and fraud. Claimants sought at least $3.6 million in deferred compensation plus interest, costs, fees, and the amendment of their Forms U5. Respondent Credit Suisse generally denied the allegations, asserted affirmative defenses, and filed a Counterclaim asserting breach of
contract, breach of fiduciary duty, unfair competition, and misappropriation of trade secrets. Further, Respondent sought a "declaration that Claimants are not entitled to vesting or delivery of their
unvested contingent deferred awards under the Share Plan and related
documentation, whether under a legal theory of constructive termination or
otherwise." The FINRA Arbitration Panel recommended, in part, that the Forms U5 for Claimant Lerner and Winderbaum be changed to reflect that each had been "Terminated Without Cause." Further, the Panel found Respondent Credit Suisse liable and ordered it to pay to:
Claimant Lerner and Claimant Winderbaum: $14,009.25 in costs and $250,000 in attorneys fees per NY Labor Law Section 198(1-a)
Claimant Lerner: $1,386,628 in compensatory damages; $415,988.40 in compensatory damages; $1,386,628 in liquidated damages per NY Labor Law Section 198(1-a) plus interestClaimant Winderbaum: $1,400,716 in compensatory damages; $420,214.80; $1,400,716 in liquidated damages per NY Labor Law Section 198(1-a) plus interestSIDE BAR: New York Labor Law Section 198: Costs, Remedies1. In any action instituted upon a wage claim by an employee or the commissioner in which the employee prevails, the court may allow such employee in addition to ordinary costs, a reasonable sum, not exceeding fifty dollars for expenses which may be taxed as costs. No assignee of a wage claim, except the commissioner, shall be benefited by this provision.1-a. On behalf of any employee paid less than the wage to which he or she is entitled under the provisions of this article, the commissioner may bring any legal action necessary, including administrative action, to collect such claim and as part of such legal action, in addition to any other remedies and penalties otherwise available under this article, the commissioner shall assess against the employer the full amount of any such underpayment, and an additional amount as liquidated damages, unless the employer proves a good faith basis for believing that its underpayment of wages was in compliance with the law. Liquidated damages shall be calculated by the commissioner as no more than one hundred percent of the total amount of wages found to be due, except such liquidated damages may be up to three hundred percent of the total amount of the wages found to be due for a willful violation of section one hundred ninety-four of this article. In any action instituted in the courts upon a wage claim by an employee or the commissioner in which the employee prevails, the court shall allow such employee to recover the full amount of any underpayment, all reasonable attorney's fees, prejudgment interest as required under the civil practice law and rules, and, unless the employer proves a good faith basis to believe that its underpayment of wages was in compliance with the law, an additional amount as liquidated damages equal to one hundred percent of the total amount of the wages found to be due, except such liquidated damages may be up to three hundred percent of the total amount of the wages found to be due for a willful violation of section one hundred ninety-four of this article. . . .
Montana Man Charged In Connection With $43 Million Fraud Scheme (DOJ Release)
https://www.justice.gov/usao-sdny/pr/montana-man-charged-connection-43-million-fraud-scheme
https://www.justice.gov/usao-sdny/pr/montana-man-charged-connection-43-million-fraud-scheme
In an Indictment filed in the United States District Court for the Southern District of New York, https://www.justice.gov/usao-sdny/press-release/file/1161116/download, Todd Capser is charged with one count of conspiracy to commit wire fraud and one count of wire fraud. As set forth in part in the DOJ RElease:
From January 2016 through April 2019, CAPSER and CAPSER's father ("CC-1") perpetrated a scheme to defraud a financial institution based in Toronto, Canada ("Financial Institution-1"), by inducing it, through false and misleading representations and omissions, to loan approximately $43.3 million to an entity incorporated by CAPSER ("Capser Entity-1"), for the purchase of two chemical and oil tankers (the "Tankers").After obtaining the loan from Financial Institution-1 and purchasing the Tankers, CAPSER and CC-1 attempted to induce at least nine other Financial Institutions to loan between $46 million and $52 million each to refinance the original loan.CAPSER and CC-1 fraudulently induced Financial Institution-1 to make the $43 million loan, and attempted to induce the other Financial Institutions to make the $46 million to $52 million refinancing loans, through, among other things: (a) fraudulently obtaining documents from a company that provides wealth‑management services to private clients ("Trust Company‑1"); (b) altering the Trust Company-1 documents, and forging additional Trust Company-1 documents, to make it appear as though CC-1 held an investment portfolio at Trust Company-1 composed of securities worth tens of millions of dollars, which could serve as collateral for the loans; (c) sending the altered and forged Trust Company-1 documents to certain of the Financial Institutions; (d) creating fake email accounts for employees of Trust Company-1, and sending emails from those accounts to certain of the Financial Institutions to make it appear as though CC-1 held an investment portfolio at Trust Company-1 composed of securities worth tens of millions of dollars; and (e) making false and misleading representations and omissions about the financial assets of CAPSER, CC-1, and their family to certain of the Financial Institutions, including falsely claiming to own a cattle company and ranch.In addition, in an effort to engender sympathy, deflect questions, and explain suspicious behavior, CAPSER falsely represented to certain of the Financial Institutions that his daughter was terminally ill with cancer.
Brockton Man Pleads Guilty To Computer Fraud And Abuse (DOJ Release)
https://www.justice.gov/usao-ma/pr/brockton-man-pleads-guilty-computer-fraud-and-abuse
Colby Anderson pled guilty in the United States District Court for the District of Massachusetts to one count of intentionally causing damage to a protected computer without authorization. As set forth in part in the DOJ Release:
In July 2018, Anderson was terminated from his position as a Network Operations Center Technician at Blueport Wireless, a high speed internet access provider. Following his termination, Anderson subsequently used his former colleagues' account login information to delete approximately 120 customer configuration profiles, causing widespread internet service issues at customer facilities.