Securities Industry Commentator by Bill Singer Esq

Go Ask Alice -- I mean, seriously, ask Alice and NOT (as in NEVER!) ask Allison; trust me, if you ask Allison, wonder awaits, along with some blunt instruments! Former Cruise Line Call Center Rep Pleads Guilty to Threatening Customer (DOJ Release)

Venezuelan Man Sentenced for Aggravated Identity Theft and Access Device Fraud (DOJ Release)

[In]Securities Guest Blog: Driving That ESOP Trolley by Aegis Frumento Esq (BrokeAndBroker.com Blog)

SEC Awards Whistleblowers Whose Information Helped Stop Fraud (SEC Release)

Montgomery County Man Pleads Guilty to Bank Fraud & Aggravated Identity Theft (DOJ Release)

FINRA Imposes Fine and Principal Bar For Failure to Reasonably Supervise. In the Matter of Michael Leahy, Respondent (FINRA AWC)

[I]n April 2018, she took a call from a Celebrity customer in Illinois who became dissatisfied with her service and hung up on her. About three minutes later, Dixon called the customer back. Dixon told the customer she knew where the customer lived and she intended to come to Illinois and kill the customer and the customer's family.

In March 2018, the Wilmington Police Department (WPD) was alerted by investigators with the State Employees' Credit Union (SECU) fraud division of ongoing fraudulent debit/credit card withdrawals being made from member accounts at various automated teller machines (ATMs) in the Wilmington area.  On March 5, 2018, the United States Secret Service (USSS) was notified by the SECU and the WPD that three individuals were attempting to illegally withdraw money from an SECU ATM located on Wrightsville Avenue in Wilmington.  Officers responded to that location and conducted a traffic stop of a vehicle in which ABDEL and two other persons were riding.  A search of the vehicle revealed approximately $9,319 in United States currency, numerous debit/credit cards, computers, digital storage media, and two debit/credit card readers/encoders.

Investigators with the SECU's fraud unit and the USSS determined that the fraudulent debit/credit cards were used at multiple ATM locations in the Wilmington area over a period of several days.  Further, the SECU's fraud unit confirmed that an illegal debit/credit card skimming device had been placed on a SECU ATM in Leland, North Carolina.  A forensic search of the seized laptop computers and cell phones revealed 566 individual card numbers which were issued by 71 different financial institutions, including 7 card numbers which were issued by financial institution in Mexico and 1 from India.  The intended loss was calculated at $283,000.

On July 3, 2018, investigators received credible information identifying co-conspirators based in Venezuela and in the Miami, Florida, area who were involved in the scheme to commit access device fraud.  The conspirators downloaded credit card data from Bluetooth debit/credit card skimming devices which were secretly installed in Tritan ATMs.  After obtaining the debit/credit card and personal identification numbers (PIN) from the debit/credit card skimming devices, the coconspirators used a credit card reader/writer to reencode counterfeit debit/credit cards.  In March 2018, ABDEL and his conspirators used the fraudulent debit/credit cards at ATMs in the Wilmington area to withdraw funds from multiple victims' accounts.  The investigation revealed that the group was traveling to various states, including Georgia, California, and Florida, to install debit/credit card skimming devices.  It is estimated that the group made $250,000 monthly as a result of the fraudulent scheme.  

Additionally, investigators learned that in March 2018, ABDEL spent four or five days in the Wilmington area placing pin-hole camera skimming devices on ATMs and collecting account numbers.  Those numbers were then encoded onto magnetic stripe cards and used to fraudulently withdraw funds from ATMs.  ABDEL and the others also travelled to the Wilmington area two to three weeks earlier in order to recover debit/credit card skimming devices and computers which were left in a suitcase in a storage unit by another coconspirator.  

[I]n the first action, the whistleblower alerted the agency to a fraudulent scheme.  The SEC awarded the whistleblower more than $277,000.  In the second action, the whistleblower, a harmed investor, provided critical information that enabled the SEC staff to recover assets that were later returned to victims.  The SEC awarded the whistleblower $45,000.

In the Matter of the Claim for an Award in connection with Redacted Redacted Notice of Covered Action Redacted ('34 Act Rel. No. 88014; Whistleblower Award Proc. File No. 2020-5) (the $45,000 Award)

https://www.sec.gov/rules/other/2020/34-88014.pdf

[C]laimant was a harmed investor who lost money in the scheme; while not the source of the investigation, Claimant provided new, critical, time-sensitive information that allowed staff to recover assets that were later returned to harmed investors; Claimant's information saved the staff time and resources in conducting its investigation and helped the Commission shut down a fraudulent scheme targeting retail investors; Claimant provided continuing assistance; and collections from the defendants of the monetary sanctions ordered were low.

In the Matter of the Claim for an Award in connection with Redacted Notice of Covered Action Redacted ('34 Act Rel. No. 88015; Whistleblower Award Proc. File No. 2020-6) (the $277,000 Award)

https://www.sec.gov/rules/other/2020/34-88015.pdf

(1) Claimant reported significant information to the Commission, alerting the staff to an ongoing fraudulent scheme; (2) Claimant's information saved Commission time and resources; (3) Claimant's information bears a close nexus to the charges brought by the Commission, as well as by the USAO; (4) Claimant provided assistance to staff in the form of an in-person interview; (5) there are significant law enforcement interests here, as Claimant's information helped the agency shut down an ongoing fraudulent scheme that was preying on retail investors; and (6) there have been low collections to date.

In 1999, Williams borrowed a series of loans from the Farm Services Agency (FSA), a division of the U.S. Department of Agriculture. To pledge collateral for the loans, Williams listed farm equipment that he owned, as well as cattle and other livestock. In April 2012, the Williams failed to make a loan payment to the FSA and in May 2012, he declared bankruptcy.

According to the plea agreement, from March 2012 through June 2015, Defendant Williams regularly sold off the cattle at various stockyards in central Kentucky, and because they had been previously pledged as collateral to the FSA, the Defendant sold the cattle in the name of others and not in his own name. Upon receiving payment for the cattle sold in the form of a check, the Defendant would forge the signature of the person the check was made out to, and then add his own signature below, enabling him to deposit the funds into his own bank account. Because he was in default on his FSA loans, Williams' actions brought about a financial gain and deprived the FSA any chance at recovering proceeds from livestock that had been pledged as collateral.

On October 31, 2019, the New Jersey Bureau of Securities issued a Summary Revocation Order against First Standard, revoking the Firm's registration in the State of New Jersey for, among other things, engaging in "a fraudulent course of business that consisted of excessive, unsuitable, and frequently unauthorized short-term trading in customer accounts that generated commissions for First Standard and its agents at its customers' expense." 

First Standard filed a Uniform Request Withdrawal from Broker-Dealer Registration ("Form BDW") on or around November 5, 2019. 

From September 18, 2019 through October 8, 2019 (the "Relevant Period"), Leahy failed to reasonably supervise PS, a former registered representative, who, while registered through First Standard, engaged in a pattern of unauthorized trading, using margin without authorization, recommending excessive and otherwise unsuitable transactions, and charging excessive commissions in dozens of customer accounts. Leahy, the sole principal at the Firm and the only individual responsible for supervising PS during the Relevant Period, was aware of multiple red flags of PS's misconduct. The red flags included: daily trade blotters that showed frequent in-and-out trading and commissions often exceeding 5%; numerous customer complaints alleging unauthorized trading, unauthorized use of margin, and excessive commissions; and notification from the Firm's clearing firm of potential unauthorized trading by PS. Leahy did not investigate those red flags or otherwise take reasonable action to curtail PS's pattern of misconduct. As a result of Leahy's failure to reasonably respond to those red flags, PS's misconduct continued unabated until the New Jersey Bureau of Securities summarily revoked PS's registration in the State of New Jersey on October 8, 2019. 

• Securities Industry Commentator
• Bill Singer