Securities Industry Commentator by Bill Singer Esq

Bill Few Associates Inc.

Cargile Investment Management Inc.

Comprehensive Capital Management Inc.

Equity Services Inc.

Essex Financial Services Inc.

Folger Nolan Fleming Douglas Capital Management Inc.

Henley & Company Wealth Management LLC

Hilltop Securities Inc. and Hilltop Securities Independent Network Inc.

IC Advisory Services Inc.

Independent Financial Group LLC

Investment Partners Ltd.

IPG Investment Advisors LLC

Michigan Advisors Inc.

Saxony Capital Management LLC

Wedbush Securities Inc.

[B]eam of Woodridge, Illinois, acting primarily through a purported investment advisory business known as Chase Private Equity and later called New World Capital, misappropriated money from retail investors that was supposed to be invested in private funds, one of which was called the Chase Private Equity Fund. Instead of investing this money as he stated he would, Beam primarily spent it on his personal and business expenses. According to the complaint, to conceal his misappropriation, Beam sent fraudulent account statements to investors. When they attempted to redeem their investments, Beam did not return any of their money. As alleged, Beam also lied to at least one of his clients by falsely claiming that he held a Series 65 securities license.

[F]rom at least 2008, Yellowstone, through Hansen and High, systematically overbilled more than 100 of its client accounts for a total amount of over $11.8 million. According to the complaint, the overcharges were used to cover operating expenses and to support Hansen's lavish lifestyle. As alleged, Yellowstone also failed to maintain certain 

claimed annual returns of up to 65%. As alleged, the defendants helped generate these supposed returns by inflating the value of a private company that the fund invested in and by valuing physical gems and minerals in the fund's portfolio through methods that failed to comply with the procedures contained in the fund's operating agreement. According to the complaint, the defendants improperly charged the fund excessive management fees of over $13 million based on the defendants' inflated and improperly-determined valuations. Since 2017, the complaint alleges, the fund has paid the defendants and their entities more than $5.9 million in fees while telling many investors that the fund had no liquidity to meet redemption requests. The complaint also alleges that the defendants and their entities engaged in self-dealing and failed to disclose their conflicts of interest, which included numerous undisclosed short-term loans to the fund some of them with annualized interest rates exceeding 100%, and the fund's undisclosed payment of service fees to entities owned by Nohl and Hull.

[D]uring May and June 2011, VAN SICKLE represented to the unhappy investors that he had a company, Troy C. Van Sickle Consulting and Collections, and that for a fee he could help them recover their lost funds.  VAN SICKLE falsely claimed that he had helped other investors recover large sums, and, in order to win investors' trust, VAN SICKLE made various promises, including entering into a romantic relationship with one of the investors. 

In February of 2012, VAN SICKLE moved to California.  After he moved, VAN SICKLE's agent told the investors that if they loaned him $75,000, he would (1) use the money in order to recover their lost investment, and (2) repay the $75,000 in 30 days.  In fact, VAN SICKLE planned to use the money for his own purposes, including paying his rent through the end of the year, and did not intend to repay the investors.  In July 2013, after one of the investors who loaned VAN SICKLE funds repeatedly sought the return of the money he loaned VAN SICKLE, VAN SICKLE sent the investor an invoice with false charges purporting to explain how VAN SICKLE had used the loaned funds in order to try to recover the investor's funds.

Over the course of the scheme, VAN SICKLE fraudulently took in $75,000.  Under the terms of the Plea Agreement, in addition to repaying the investors that $75,000, VAN SICKLE has agreed to repay the investors an additional $175,000 in funds that he received from the investors. 

As a customer support agent for Robinhood Financial, Burgess had access to Firm customer accounts and information. QW was a Firm customer who had linked his personal bank account to his Firm account. On April 15, 2019, Burgess accessed QW's personal bank account and transferred $49 from QW's account to pay her personal credit card. On April 16, 2019, Burgess accessed QW's account again and transferred $1,820 to pay her college tuition. Burgess knew that the funds did not belong to her, and each of the transfers was made without QW's knowledge or consent. 

stated it would use the capital raised in the ICO for general expenses, and also to develop software and promote blockchains based on that software.  Block.one's offer and sale of 900 million tokens began shortly before the SEC released the DAO Report of Investigation and continued for nearly a year after the report's publication, eventually raising several billion dollars worth of digital assets globally, including a portion from US investors.  Block.one did not register its ICO as a securities offering pursuant to the federal securities laws, nor did it qualify for or seek an exemption from the registration requirements.

[T]he defendants conned U.S. and foreign investors out of tens of millions of dollars through three online binary options brokers, Bloombex Options, Morton Finance and Starling Capital, by the allure and promise of quick profits. The SEC alleges that defendants utilized call centers in Germany and Israel which operated as "boiler rooms," in which salespersons used high pressure sales tactics to offer and sell speculative binary options to vulnerable investors. Employees at these call centers allegedly persuaded investors to open binary option trading accounts and deposit large sums into those accounts. According to the complaint, call center employees lied to investors about their names, location and expertise in trading securities and they falsely told investors that the brokers only earned money if investors made money. In reality, the brokers earned money only from investor losses and thus had no incentive to advise investors on how to trade binary options profitably.  The complaint alleges that most investors who traded binary options through the three brokers lost money, and some individual retirees lost their entire savings amounting to hundreds of thousands of dollars. The SEC also alleges that the brokers largely refused to honor investor requests to withdraw money from their trading accounts.

THOMPSON claimed in promotional materials that Volantis "minimize[d] settlement default risk" in cryptocurrency transactions.  THOMPSON claimed that because Volantis acted as a custodian of assets for "both sides of the transaction, there is no risk of default." 

 In June and July 2018, THOMPSON made false statements to one victim company ("Company-1") to induce Company-1 to send Volantis over $3 million to fund the purchase of Bitcoin for Company-1.  THOMPSON falsely assured Company-1 that THOMPSON had the Bitcoin in hand and Company-1's money could not be lost.  Even though THOMPSON had told Company-1 that before any transaction, "cash is with me, coin is with me," THOMPSON sent over $3 million of Company-1's money to a third-party entity purportedly in exchange for Bitcoin without first receiving any of the Bitcoin in hand.  After taking Company-1's money, THOMPSON lied for days about the status of the transaction and the location of Company-1's Bitcoin and money, which was never returned. 

In July 2018, THOMPSON made false statements to another victim company ("Company-2") to induce Company-2 to send Volantis over $4 million to fund the purchase of Bitcoin for Company-2.  After receiving Company-2's money, THOMPSON sent a substantial portion of the money to a third party without first receiving any Bitcoin in return.  THOMPSON never provided Company-2 with any Bitcoin, nor did he return Company-2's money.  After receiving Company-2's money, THOMPSON also lied to Company-2 about the location of the Bitcoin and the status of the transaction.

[I]n or about 2018, Thompson induced two customers to send roughly $7 million to fund the purchase of bitcoin after making false representations that he or the company had the bitcoin in hand and the customers' money would be safeguarded.  After receiving the customers' money, the complaint alleges, Thompson sent virtually all of the money to third parties without first receiving any bitcoin in return.  It is further alleged that after taking the customers' money and failing to provide any bitcoin in return, Thompson lied to the customers about the location of the bitcoin, the reasons the transaction was not completed, and the status of the customers' money.

routinely used a personal email address to send hundreds of communications with customers regarding business matters which were not retained by the Firm. Respondent's use of the personal email caused the Firm to fail to comply with its recordkeeping obligations under Exchange Act and NASD and FINRA rules. 

Respondent used the personal email account even though the Firm's written procedures required him to use the Firm's email system when sending or receiving business related emails. Respondent signed annual attestations stating that he was aware of, and abided by, the Firm's policies and procedures, including specifically the Firm's policies governing email communications. Furthermore, Respondent used the personal email address to send correspondence to customers which required Firm compliance review and pre-approval, and thereby circumvented Firm compliance procedures. 

From 2013 through 2019, BOOTH solicited money from clients of Booth Financial and falsely promised to invest their money in securities offered outside of their ordinary advisory and brokerage accounts.  Specifically, BOOTH directed certain of his clients to write checks or wire money to an entity named "Insurance Trends, Inc."  Instead of investing his clients' funds, BOOTH, who controlled the bank account of Insurance Trends, Inc., subsequently misappropriated his clients' funds to pay his personal and business expenses.

In total, BOOTH raised approximately $4.9 million from approximately 40 investors.  BOOTH lured many of his victims with false promises of safe investments with high returns.  For example:

• BOOTH convinced a recently widowed elderly investor ("Investor-1") to move money she had received from her late husband's pension into Insurance Trends, Inc.  BOOTH falsely promised Investor-1 that she would have $1 million by the time she was 100 years old.  As a result of BOOTH's false assurances, Investor-1 invested more than $600,000 with BOOTH. 

• BOOTH similarly convinced another investor ("Investor-2") to move his money into an investment product that, according to BOOTH, would never lose its principal and would grow with the market.  Based on this false representation, Investor-2 moved money he had set aside for his child's college expenses, at least approximately $60,000, to BOOTH.  BOOTH subsequently failed to provide Investor-2 with documentation of his investment or to allow Investor-2 to redeem his investment. 
  
  
• BOOTH convinced another elderly investor ("Investor-3") to withdraw money from an annuity established for the care of his disabled sibling, approximately $18,000, and invest that money with BOOTH.  Investor-3 gave the money to BOOTH with the understanding that BOOTH would invest that money for the benefit of Investor-3's sibling's continued care.

To prevent investors from seeking a return of their money, and to induce additional investments, BOOTH provided investors with fabricated account statements that falsely indicated that BOOTH had purchased certain securities on their behalf and that those investments had generated a profit.  BOOTH further concealed the truth from investors by using money obtained from new investors to make redemption payments to previous investors, in a Ponzi-like fashion.

[F]rom at least August 2014 to June 2019, James T. Booth, while operating an investment advisory and brokerage business, made false promises of safer investments and higher returns to convince investors to move assets out of their ordinary accounts. Instead of purchasing securities, Booth allegedly deposited investors' funds into a bank account of an entity he controlled, and then moved the funds into his personal accounts and used them to pay for business and personal expenses, including meals, entertainment and numerous trips to casinos. According to the complaint, Booth supplied his clients with detailed false account statements showing securities that he purportedly purchased on their behalf, many of which showed gains over time from the fictitious investments. The complaint alleges that when investors asked to redeem some or all of their investments, Booth provided investors with Ponzi-like payments, using assets from new investors to pay back old investors.

[B]arnett founded the firm in 2010 while still in college, raised millions from friends and family members, and invested almost exclusively in structured notes. The complaint alleges that as SBB sought outside investors, Barnett and Chief Operating Officer and Chief Compliance Officer Matthew Aven promised prospective investors that they would use "fair value" when recording investments. Instead, they used their own valuation model to artificially inflate the value of the structured notes. As a result, SBB misstated the funds' historical performance and overcharged investors approximately $1.4 million in fees. According to the complaint, once the valuation issues were uncovered by SEC exam staff, the defendants took steps to conceal their fraud from investors and SBB's auditor. The complaint alleges that when SBB hired an outside valuation firm in 2016, performance for its flagship fund was slashed, and SBB surreptitiously credited investors for the overcharged fees but did not disclose the underlying problem.

[A]jzenman, acting through Cutting Edge, purchased two notes purportedly issued by publicly-traded Bebida Beverage Co. with a feature allowing them to be converted into Bebida stock. According to the SEC's complaint, these notes had been fraudulently created by Bebida's CEO, and Ajzenman, acting through Cutting Edge, purchased the notes at steep discounts at a time when the price of Bebida stock ensured that even the first round of conversions would result in significant gains for Ajzenman and Cutting Edge. The complaint alleges that Ajzenman negotiated the purchases only with Bebida's CEO, which was inconsistent with Ajzenman's standard business practice. As alleged, within days of purchasing each of the notes, Ajzenman, acting through Cutting Edge, began exercising the convertible feature of the notes and selling the resultant Bebida stock into the public market when no registration statement was in effect and no exemption from registration was available.

[I]n their Statement of Claim, the Cassis Family alleges that they lost in excess of $400,000 after they purchased certain Deutsche Bank Notes (the "Notes") on the recommendation of Jose Luis Llamas ("Mr. Llamas"). Mr. Llamas was the Cassis Family's investment manager, and, at the time in question, a registered securities broker for and employee of DBSI. Mr. Llamas was also an employee of Deutsche Bank Trust Company Americas ("DBTCA"). Deutsche Bank AG, Frankfurt am Main issued the Notes and the Cassis family purchased them through Deutsche Bank (Suisse) SA. DBSI contends the arbitration is improper because (1) there is no arbitration agreement between the Cassis Family and DBSI, (2) the Cassis Family was not a customer of DBSI, and (3) the dispute did not arise in connection with DBSI's business activities since the Note was issued by an entirely separate entity. 

In her Report, Judge McAliley found that DBSI was required to proceed in arbitration pursuant to Rule 12200 of the FINRA Code of Arbitration Procedure for Customer Disputes. Rule 12200 requires FINRA members to submit claims to arbitration if (1) "[r]equested by the customer", (2) "[t]he dispute is between a customer and a member or associated person of a member", and (3) "[t]he dispute arises in connection with the business activities of the member or the associated person." FINRA Rule 12200. It is undisputed that DBSI is a member of FINRA. Applying these elements, Judge McAliley found that (1) the Cassis Family was a customer, (2) the dispute was between the Cassis Family and Mr. Llamas, an associated person of DBSI, and (3) the dispute arose in connection with the business activities of an associated person of DBSI. In discussing the last element, Judge McAliley found that because the Cassis Family alleged that DBSI negligently supervised Mr. Llamas and DBSI was required to supervise its associates, the dispute arose in connection with the business activities of DBSI.

told investors they would use investor funds to make loans to real estate developers who would then use the money to acquire and rehabilitate homes in Charlotte, North Carolina. In truth, the complaint alleges, they used a large portion of the funds to pay themselves more than $1 million in commissions and repay principal and interest due to other investors. The complaint further alleges that Bradley and Hershey oversaw three securities offerings for a third-party real estate developer in Florida and, in connection with those offerings, operated as unregistered brokers and received approximately $2.1 million in commissions.

mastermind of the scheme, which promised investors extremely high rates of return on investment contracts and promissory notes. These investments were for the purported purchase and immediate resale of large numbers of cattle. The complaint alleges that Ray similarly solicited investments in his state-licensed marijuana business by promising large returns. In fact, the vast majority of investor money allegedly was used to pay returns to earlier investors. According to the complaint, at the height of the scheme, Ray moved or directed the movement of more than $140 million per month through bank accounts under his control. The complaint alleges that Ray controlled various corporate entities, including Custom Consulting and Product Services, LLC; MR Cattle Production Services, LLC; Universal Herbs, LLC; DBC Limited, LLC; RM Farm and Livestock, LLC; and Sunshine Enterprises and used them to solicit investments and/or to receive money from or send money to investors. The complaint further alleges that Reva Stachniw of Galesburg, Illinois, and Ron Throgmartin of Buford, Georgia both assisted Ray's scheme. According to the complaint, Stachniw opened bank accounts nominally in her control but permitted Ray to use them in furtherance of the scheme, ignoring red flags that Ray was not running legitimate businesses. Throgmartin assisted Ray by drafting invoices and emails reflecting fictitious cattle trades and sending them to investors.

• Securities Industry Commentator
• Bill Singer