The Wall Street Legal & Regulatory Feed

Securities Industry Commentator by Bill Singer Esq

May 14, 2021






http://www.brokeandbroker.com/5848/sztrom-sec-ria/
The SEC filed a Complaint in January 2021 alleging Investment Advisers Act fraud. About two months later, the Defendants moved to dismiss. It must have been quite the challenge for SEC staff to draft a Complaint in the midst of the Covid pandemic; and, similarly, it likely posed one hell of a challenge for Defendants to put together their Motion to Dismiss. Everyone gets an "A" for effort. Efforts aside, the federal Court sided with the SEC and the case moves forward.

Fraudster Sentenced to More Than 13 Years in Parallel Criminal Case (SEC Release)
https://www.sec.gov/litigation/litreleases/2021/lr25088.htm
As alleged in part in the SEC Release:

DaRayl D. Davis, charged by the SEC in December 2017 with raising millions of dollars from investors by selling them fictitious financial products, has been sentenced in a parallel criminal case to 160 months in prison and ordered to pay restitution of more than $7.1 million.

The criminal charges against Davis stem from the same misconduct alleged in the SEC's complaint, filed in federal district court in Chicago. The complaint alleges that Davis hosted seminars and used his religious affiliation to gain investors' trust. The complaint further alleges that Davis fabricated documents and made false statements to support the sale of fictitious financial products. As alleged, Davis did not invest the money he raised from his clients as he had represented, but instead used the money to fund a lavish lifestyle, repay prior investors, and further his fraudulent scheme.

The SEC's litigation against Davis and relief defendant Affluent Advisory Group, LLC is ongoing. On March 26, 2018, the district court entered default judgment as to liability against Davis and Affluent Advisory Group, LLC. The court also held Davis in contempt for violating an asset freeze order previously entered by the court.

https://www.justice.gov/usao-wdva/pr/madison-county-woman-indicted-mail-fraud-wire-fraud
In an Indictment filed in the United States District Court for the Western District of Virginia, Christine Favara Anderson was charged with eight counts of wire fraud, three counts of mail fraud, one count of making a false statement, and one count of concealing records in a federal investigation. As alleged in part in the DOJ Release:

[S]tarting in 2014, Christine Favara Anderson, 51, of Reva, Va.,  owned and operated the publishing companies known as Christine F. Anderson Publishing and Media (CFA) and Sage Wisdom. Anderson took money from book authors but later failed to pay the authors their royalties as owed and did not provide products and services as negotiated. In addition, Anderson often falsely claimed to have been diagnosed with cancer to delay payment to the book authors, while also purporting to maintain vast wealth.  

In addition to the alleged book publishing scheme, Anderson is also charged with orchestrating a real estate scheme where she signed contracts for expensive real estate, provided false proof of funds, and then was unable to provide the earnest money deposits.  Often, Anderson would sign bad checks for the earnest money deposits, which would never clear. While she was putting contracts on these properties, Anderson took money from individuals helping her in these real estate schemes, promising to pay these individuals back.  Anderson used her false interest in the expensive real estate to prove to her victims that she was able to pay back the loans, but never did.  Anderson's excuses for her inability to pay the earnest money deposit and the loans included her false claims of a cancer diagnosis and freezes on her bank accounts.

In a Complaint filed in the United States District Court for the Southern District of Texas
https://www.sec.gov/litigation/complaints/2021/comp25089.pdf, the SEC charged investment adviser Knight Nguyen Investments, Christopher Knight Lopez, Forrest Andrew Jones, and Jayson Lopez with scheming to invest funds from advisory clients and retail investors in at least five fraudulent securities offerings. As alleged in part in the SEC Release:

[K]night Nguyen majority owner Chris Lopez and representative Forrest Jones held out the firm as an established investment adviser with expertise in low-risk alternative investments. The SEC also alleges that Chris Lopez and Jones largely targeted older and unsophisticated investors seeking to preserve or grow their retirement savings, telling them that Knight Nguyen only invested in "proven" companies that met the firm's stated investment criteria.

According to the complaint, however, Chris Lopez had no experience as a securities professional before forming Knight Nguyen and the firm had little or no experience with alternative investments. In addition, the SEC alleges that investor funds were only placed in high-risk securities issued by companies that did not meet Knight Nguyen's investment criteria and were in fact owned or controlled by Chris Lopez and/or his brother Jayson Lopez. As alleged in the complaint, as a result of these and other misrepresentations, Knight Nguyen, Chris Lopez, and Jones raised at least $3.7 million from approximately 70 advisory clients and retail investors between March 2016 and September 2018. The SEC alleges that Jayson Lopez aided and abetted the fraud by misusing investor funds and helping fabricate false financial statements and other documents.

http://www.brokeandbroker.com/5846/sec-whistlblowers-pie/
We got one pie. We got two hungry whistleblowers eager to cut into that pie. But they have to wait. The SEC's Claims Review Staff ("CRS") needs to issue the all important Preliminary Determination. Oh my . . . CRS recommended that Claimant 1 be awarded $18 million and Claimant 2, $4 million. And now we got a battle over how the SEC sliced the pie!

http://www.brokeandbroker.com//5845/blackbook-finra-dnj/
When we were kids, we were warned that we would drown if we went back into the water so much as a minute before the magical "one hour." Then there was that story about how swallowed gum stayed in your stomach for seven years. Not six years. Not eight years. But seven. And, of course, someone knew someone who knew a kid who had a brother who swallowed gum on a dare and it didn't come out for . . . you got it . . . seven years. In a recent federal case, we got seven years between a FINRA regulatory settlement and a federal court's opinion that what was agreed to all those years ago is going to stay on the books. Which proved a hard wad of gum for the respondents to swallow. 

http://www.brokeandbroker.com/5844/irreparable-harm-tro/
As readers of the BrokeAndBroker.com Blog know, I am a critic of inarticulate legal writing -- be that a pleading, motion papers, awards, opinions, orders, or any number of press releases. In a recent ruling on a motion before the District of Connecticut, Senior District Judge Charles S. Haight, Jr. shows how it should be done -- he pens an enchanting, entertaining, comprehensive, and superbly edited opinion.

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