Securities Industry Commentator by Bill Singer Esq

[A]fter making the fraudulent tweets, Craig allegedly placed trades in an attempt to capitalize on the stock price movements. Notwithstanding Craig's attempt to capitalize on the downward stock price movement he caused, he allegedly waited too long to place each trade, resulting in only $97 in illicit trading profits.

[B]etween 2015 and 2017, Cavell, with others, developed a scheme to market and sell a drug, 2,4-Dinitrophenol (also known as DNP), as a weight loss drug and "fat burner" despite knowing that DNP is not approved by the FDA as a substance for human consumption. Cavell sold DNP in pill form and called it a fertilizer -- a term under which is it legally sold in other circumstances.

Cavell admitted that he controlled websites that marketed the drug as a supplement while at the same time discouraging its use. He proceeded to sell DNP pills on another website, thefertizerwarehouse.com, for the purpose of misleading U.S. Food and Drug Administration regulators.

DNP has been commercially used to manufacture dyes and wood preservatives, as a fertilizer, and as a pesticide. The U.S. Food and Drug Administration has declared that DNP is too toxic to be used for human consumption under any circumstances.

According to court documents, Cavell collected at least $763,000 for compounding cheap fertilizer into pills for human consumption.

A "cashout scheme" is a criminal conspiracy whereby individuals utilize stolen or otherwise compromised bank or credit card company account numbers encoded on access devices such as ATM cards, credit cards, gift cards, and hotel keys, to withdraw large sums of currency from ATMs.  These "cashout schemes" are often multi-layer conspiracies wherein computer hackers and their associates steal confidential financial information, including business and personal account numbers and personal identification numbers.  The hackers often transmit this information to co-conspirators through an array of online communication mechanisms. Ultimately, the purchasers of the stolen financial information use the account numbers to encode plastic cards with magnetic stripes, which they then use to withdraw currency from ATMs.

Ramos advertised Phantom Secure's products as impervious to decryption, wiretapping or legal third-party records requests. Phantom Secure routinely deleted and destroyed evidence from devices that it knew had been seized by law enforcement.  According to Court documents, Phantom Secure's clients used email handles like the following to conduct criminal activities:  leadslinger@freedomsecure.me; The.cartel@freedomsecure.me; The.killa@freedomsecure.me; Trigger-happy@lockedpgp.com; Knee_capper9@lockedpgp.com; Elchapo66@lockedpgp.com;  Time4a187@freedomsecure.me.     

According to court documents, one of Ramos's customers, Owen Hanson (who was previously sentenced to 21 years in custody), used only six Phantom Secure devices to coordinate the transportation of more than a ton of cocaine from Mexico into the United States and on to Canada and Australia.  The government conservatively estimates there were at least 7,000 Phantom Secure devices in use at the time Ramos was arrested--meaning that "the amount of drugs Phantom Secure aided and abetted in transporting by providing devices and services to criminals worldwide was too high calculate." 

Ramos' customers used his products to devastating and sometimes deadly effect, and Ramos used this to market his encryption services to criminals across the world.  According to court documents, in response to a March 5, 2014 news article that reported investigations of a gangland murder were stymied because the suspects used Phantom Secure devices to coordinate the killing, Ramos wrote, "this is the best verification on what we have been saying all along - proven and effective for now over nine years.  It is the highest level of authority confirming our effectiveness.  It can't get better than that."    

[D]odt worked in a call center in Costa Rica in which co-conspirators, who posed as representatives of the District of Columbia Department of Consumer and Regulatory Affairs and federal agencies, including the U.S. Federal Trade Commission, and who also posed as federal judges, contacted victims in the United States - primarily senior citizens - to tell them that that they had supposedly won a substantial "sweepstakes" prize.  After convincing victims that they stood to receive a significant financial reward, the co-conspirators told victims that they needed to make a series of up-front cash payments before collecting, purportedly for items like insurance fees, taxes and import fees.  Co-conspirators used a variety of means to conceal their true identity, such as Voice over Internet Protocol (VoIP) services provided by Dodt that made it appear that they were calling from Washington, D.C., and other places in the United States. 

As the evidence presented at trial illustrated, Dodt was an integral part of this scheme in that he knowingly provided services that were necessary for the scheme to operate and that facilitated the concealment and, ultimately, success of the scheme for many years.  Specifically, Dodt provided and maintained VoIP phone technology and assigned phone numbers associated with locations in the United States through which members of the conspiracy were able to make the fraudulent calls to victims in the United States and conceal their identities and location.  Dodt specifically assigned virtual phone numbers with area codes associated with Washington, D.C., to make it appear that the calls originated from within the United States and that also bolstered conspirators' misrepresentations that they were representatives of government agencies located in Washington.  Dodt also warned the co-conspirators if certain numbers were "hot" - i.e., there were customer complaints or law enforcement inquiries - and replaced those phone numbers with new phone numbers that the co-conspirators then used in furtherance of the scheme, the evidence showed.

[F]rom approximately January 2012 until June 2016, Rispoli was employed by Lodestone Management Consultants, later known as Infosys Consulting (the "company").  Beginning in approximately 2013, Rispoli worked for the company from her former home in East Haven, which she shared with her then-boyfriend, Michael Miano.  In her capacity as a company employee, Rispoli had an American Express credit card to use to pay for travel, entertainment and other business expenses incurred by the company's employees and potential employees.

From approximately 2013 until July 2016, Rispoli charged more than $250,000 of her own and Miano's personal expenses to the company's American Express card.  Rispoli also fraudulently transferred more than $800,000 in funds from the company's American Express card to PayPal and Venmo accounts controlled by Rispoli and Miano.  To conceal her scheme, Rispoli altered the company's American Express account statements and created false billing summaries, which she emailed to the company's accounting firm.

Morrow was the owner of a Louisiana company called UVC Technologies LLC, which was formed in 2011. UVC Technologies represented itself as providing green, chemical free disinfection machines utilizing ultraviolet germicidal irradiation to meet the needs of various medical communities. From 2011 to 2016, Morrow solicited individuals to invest money in the company. He used false statements and misrepresentations indicating that the funds would only be used for business expenses and distribution of additional disinfection machines. He promised large sums of money in a short time period for their investments. When the investors complained about not being paid back and for the purpose of soliciting funds from them, Morrow falsely claimed that the business had been sold for millions and that their money would be paid back from the proceeds of the sale.  Morrow also told investors that he would use funds for business expenses, but he spent their funds on personal living and travel expenses. Morrow defrauded the investors out of more than $2 million during the course of the scheme. He pleaded guilty to the federal charges on January 14, 2019.

[R]iver Source's primary revenue stream was customer advisory fees.  Customer agreements provided that those fees would be based on each customer's assets under management.  The SEC's order finds, however, that in 2015 and 2016, Anderson overcharged a majority of his clients.  The amount and percentages of the overcharges varied but, in the aggregate, amounted to approximately 40% more than the agreed-upon maximum customer advisory fees.  As described in the order, Anderson also misled his clients about the reason he transferred their assets from River Source's long-time asset custodian, falsely stating that it was his decision and that the separation was "amicable."  In fact, as the order finds, the asset custodian ended the relationship with River Source after it noticed irregular billing practices and failed to receive sufficient supporting documentation from Anderson.  Furthermore, the order finds that Anderson made material misstatements in reports filed with the Commission, including overstating River Source's assets under management by at least $34 million (18%) in 2015 and $61 million (35%) in 2016, and failed to implement required compliance policies and procedures. . . .

During the period March 2010 through October 2016 ("Relevant Period"), Harger permitted customers to sign without date partially completed Variable Annuity ("VA") Exchange Forms. Subsequently, Harger entered the missing information before submitting the forms to Dowden, the designated supervising principal, for review and approval of the proposed transactions. Dowden then wrote in a date next to the applicable customer's undated signature using the date he approved the transaction. By virtue of this conduct, Harger and Dowden violated NASD Rule 3110 (from March 2010 through December 4, 2011) and FINRA Rules 4511 (from December 5, 2011 through October 2016) and 2010. 

HARGER:

Since this matter has been brought to my attention I have learned that it is important to both fully and accurately complete all forms on which client signatures appear and insure that the client dates the forms at the time of signature even when I have fully explained all of the information contained on the form to the client. Had I done this I would have avoided the violation. I will do this in the future on any client form for which there is information which is confirmed by the client. 

By taking the above steps I've alleviated any risk that the issues presented in my Letter of Acceptance, Waiver and Co repeated in the future. 

DOWDEN:

Since this matter has been brought to my attention, I have learned that it is important that all documents signed by a client be dated not only as of the actual date of the client's signature but be dated on the actual date of the signature. Had I insisted that the form be dated when the form was completed and signed by the client, I would have avoided the violation. I will do this in the future on any form submitted to me for approval. 

By taking the above steps I've alleviated any risk that the issues presented in my Letter of Acceptance, Waiver and Consent may be repeated in the future. 

• Securities Industry Commentator
• Bill Singer