Securities Industry Commentator by Bill Singer Esq

Lehigh Valley Attorney Pleads Guilty to Orchestrating $2.7 Million Ponzi Scheme that Targeted His Own Clients to Invest in Fake Business Opportunities (DOJ Release)

California Con Man Returns to Prison for Running New Fraud Scheme While on Supervised Release (DOJ Release)

SEC Charges Two Individuals and Their Companies for a Fraudulent Oil-And-Gas Equipment Scheme (SEC Release)

Federal Court Orders Defendants to Pay Over $1.7 Million to Settle CFTC Enforcement Action Charging Fraud and False Statements (CFTC Release)

AWC Has Potential Precariously Perched Atop Conjecture and Speculation (BrokeAndBroker.com Blog)

Are Your Ears Ringing, Wall Street Dealmakers? / A top antitrust lawmaker wants a temporary ban on mergers during the pandemic. Right instinct, wrong answer. (Bloomberg by Tara Lachapelle)

Accept No Substitutes: There's Only One Texas State Securities Regulator (TSSB Release)

perpetrated a multiyear securities fraud scheme that targeted his own law clients. The scheme involved the fraudulent sale of the securities of two entities, THL Holdings, LLC and Ferran Global Holdings, Inc. Lahr raised funds for the two companies by soliciting investments from his clients, telling them that their money would be used for a variety of business opportunities which were, in fact, non-existent.

Lahr initially sold THL Holdings investments, promising that the money raised would be used to pursue specific business opportunities, including mining operations in Papua New Guinea and the acquisition of the shares of a penny stock. In reality, the money was used for Lahr's personal expenses and to make Ponzi scheme payments to prior investors, among other things. Once Lahr realized that he was running out of investor money to pay the THL Holdings investors, he sought investors for a second entity, Ferran. He told the Ferran investors that their money would be used for business opportunities, including even more mining in Papua New Guinea and residential property leases in Spain and England-but, in fact, these funds were used to repay the prior THL Holdings investors and for Lahr's personal expenses to fund his lifestyle. Among these personal expenses were his home mortgage, his child's school tuition, utility bills, and other personal debt. Total investor losses are estimated to be over $2.7 million.

Even after he was caught, Lahr continued his deception by lying in sworn testimony before the U.S. Securities and Exchange Commission (SEC). In this testimony, Lahr denied writing checks to his personal accounts from the THL Holdings accounts, when, in fact, he had written at least 25 separate checks to himself over a three-year period.

[L]ess than two weeks after completing a 22-month federal prison sentence for a similar fraud scheme, Gunn registered a new fictitious company called Legacy Funding Group. According to a website Gunn created, Legacy Funding Group was a financing company "with access to many private banking institutions and other professional relationships" that "specialized in structured asset based financing and equipment leasing."

Gunn went to great lengths to make Legacy Funding Group appear legitimate, opening corresponding bank accounts, registering email addresses, falsely claiming to lease high-end commercial office space, and attempting to disassociate his true identity from the company. His scheme worked. In a matter of months, Gunn had successfully cheated 11 clients out of more than $344,000. Gunn convinced his victims, many of whom were in agriculture or agriculture-related industries, to pay him various upfront costs in order to obtain promised financing or loans.

Once he received his clients' money, Gunn moved it between several bank accounts using cash, cashier's checks, and temporary checks. His cash withdrawals alone exceeded $100,000. When his clients complained about the lack of financing and demanded their money be returned, Gunn referred them via email to a fictitious legal department. In the end, Gunn did not obtain any financing or loans for his clients and diverted all of their money to personal use.

[F]rom January through at least June 2019, Phil Hudnall, with Todd Esh's help, defrauded at least 12 investors in a securities offering they conducted through BirdDog Business Group, LLC and BirdDog Oil Equipment, LLC. According to the complaint, Hudnall and Esh sold promissory notes by telling investors that BirdDog entities would buy and refurbish used oil and gas equipment for later resale at a profit. The complaint states that Hudnall and Esh falsely represented that they had successfully completed prior profitable equipment transactions, and promised investors that they would receive a 30% return and that their principal would be secured by the equipment. The complaint alleges that in reality, the BirdDog entities had never completed any oil-and-gas equipment transactions, let alone any profitable transactions. Hudnall allegedly misappropriated the majority of the investors' funds to purchase of land and mineral rights in Colorado, make Ponzi-type payments to investors in other offerings, and support his lavish lifestyle.

[F]rom at least July 1, 2014, to on or about January 31, 2016, Jousef and FuturesFX fraudulently promoted and sold access to the trading system ostensibly to provide, among other things, a methodology for determining when to enter and exit forex and commodity futures contracts. According to the order, to induce members and prospective members to purchase subscriptions to the trading system, defendants made numerous materially false and misleading statements and omissions on the company's websites, in the online trade room, and in email advertisements. The order also finds that, as a result of the fraudulent solicitation scheme, defendants received approximately $1.3 million in subscription fees from more than 300 members located in the United States and abroad. 

In addition, the order finds that Jousef knowingly made false or misleading statements regarding material facts to the NFA when he submitted annual CTA registration updates concerning FuturesFX's predecessor company.

It would behoove government leaders and antitrust authorities to not allow a repeat of the last private equity buying binge, in which dozens of retailers were overloaded with debt and collapsed under the burden. Take Toys "R' Us: Many have lamented the sad tale of Amazon.com Inc. crushing the iconic toy-store chain, but to accept that simplistic explanation is to rewrite history. Though online competition was inevitable, debt from a long-ago leveraged buyout hastened the demise of the Wayne, New Jersey-based retailer and left so many without jobs, as its own financial data showed. Revenue at Toys "R" Us held up during the last recession and in the years that followed. It's quite likely the chain would have had more years left in it - but its interest payments overtook operating profit, leaving the brand unable to invest in its future.

The website host shut down the site shortly after the TRO was entered. A hearing to consider a permanent injunction is scheduled for May 7.

The BSFS describes itself as a regulator with wide authority, based in downtown Austin at an address five blocks from the headquarters of the Texas State Securities Board.

The BSFS does not exist, and its website was set up by a "John Doe" using a Panamanian company that allows domain users to conceal who actually registers a site name.

On its site, the BSFS claims it is responsible for "supervising, managing, and implementing all federal securities laws" related to mergers and acquisitions, and its "mission" is to "protect investors and maintain integrity of the securities industry."

According to a complaint filed by the U.S. Justice Department, an individual claiming to be with the BSFS is using the pseudonym "Brian Vance" in dealing with potential victims of the alleged identity theft fraud.

• Securities Industry Commentator
• Bill Singer