Securities Industry Commentator by Bill Singer Esq

FINRA Arbitration Award Limits Social Media Liking and Linking (BrokeAndBroker.com Blog)

Needham Police Officer and Two Others Arrested for Insider Trading Scheme / Defendants allegedly profited from information obtained from public company executive (DOJ Release)

SEC Charges Two in Penny Stock Fraud Scheme (SEC Release)

SEC Wins Judgment Against Georgia Individual in Prime Bank Investment Scheme (SEC Release)

SEC Charges Colorado Man with Fraud Related to Cryptocurrency Venture (SEC Release)

Former Executive Vice President Of T.J. Martell Foundation Charged With Embezzling Over $3.7 Million / Scheme to Defraud National Cancer Research Organization (DOJ Release)

Rochester Man Who Bilked At Least 1000 Victims Out Of More Than 100-Million In A Nationwide Multi-Million Dollar Ponzi Scheme Going To Prison (DOJ Release)

Analyst Michael Mayo Awarded $400,000 in Compensation Dispute Against CLSA Americas

In the Matter of the Arbitration Between Michael Mayo, Claimant, v. CLSA Americas, LLC, Respondent (FINRA Arbitration Award)

[B]eginning in or around June 22, 2016, Forte - an officer with the Needham Police Department - obtained material non-public information from a close relative who is a senior executive at Analog Devices, Inc. (Analog), a Norwood-based semiconductor company, about Analog's planned acquisition of Linear Technology Corp. (Linear), a semiconductor company based in Milpitas, Calif. Forte allegedly passed the information to two close friends, Manning and Younis, who purchased shares of Linear stock in the week leading up to the public announcement of the acquisition on July 26, 2016. Younis also allegedly purchased call options -which are a bet that the price of a stock will increase prior to the expiration of the option - and tipped a business associate to purchase Linear shares as well. After the deal was announced, Manning, Younis and Younis' associate allegedly sold their Linear securities at a profit, and Manning paid Forte a kickback in appreciation for Forte's stock tip.

[W]ithin months of being released from federal prison on a previous penny stock fraud conviction, Offill (using the alias "Jim Jimerson") started a new penny stock scheme to misappropriate millions of shares of a publicly-traded microcap company. Over the next year, Offill and Herman allegedly fabricated a series of fraudulent documents, agreements, and transactions to cause the issuance and transfer of millions of shares of stock to Herman and an associate for the purpose of selling them to the public. According to the complaint, the stock that defendants misappropriated belonged to the former controlling shareholder of the microcap company, who never authorized any of the transactions. The complaint alleges that Offill and Herman then directed the sale of the microcap company's stock into the market, in return for approximately $1.4 million in trading proceeds, which Offill and Herman shared.

Offill was convicted of securities fraud and other crimes in 2010, for which he was sentenced to 96 months in prison. See United States v. Offill, No. 1:09-CR-00134-001 (E.D. Va.). In addition, the SEC previously charged Offill with securities registration violations for his roles in two other microcap frauds, where it obtained penny stock bars and other relief against him. See SEC v. Offill, et al., No. 3:07-CV-1643-D (N.D. Tex.) and SEC v. Fisher, et al., No. 2:07-CV-12552 (E.D. Mich.).

[B]aker and codefendant Elizabeth Oharriz engaged in a scheme to sell fictitious prime bank instruments to investors, misrepresenting the instruments as legitimate and claiming that investors would earn substantial profits. As alleged in the complaint, Baker and Oharriz defrauded five groups of investors out of over $2 million and attempted to prevent investors from uncovering the fraud by providing them with fabricated bank documents.

The SEC's complaint charged Baker, Oharriz, Baker's company Prestige Global Trading, LLC, and Oharriz's companies, Diversified Consulting & Logistics, Inc. and Sienna Business Group, Inc., with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint also charged Baker and Oharriz with violating the registration provisions of Section 15(a) of the Exchange Act. On January 5, 2021, the court granted the SEC's motion for summary judgment against Baker, reserving the determinations of penalties or other relief for a later date. Oharriz and her companies previously entered into a bifurcated settlement, agreeing to be permanently enjoined from violations of the charged provisions with relief to be determined by the court at a later date.

[F]rom August through October 2019, Gold Hawgs raised $400,000 from 16 investors for the creation of a new cryptocurrency. The SEC's complaint further alleges that Gold Hawgs touted large potential returns for investors after the completion of its initial coin offering, but the business failed before reaching that stage. Instead of using all of the investor funds to develop Gold Hawgs' business, Garcia, the chief financial officer and a 50% owner of the company, allegedly stole approximately $123,000 of the money raised from investors by transferring the funds to another company that he controlled; he then allegedly used the money to pay for various personal and business expenses unrelated to Gold Hawgs.

The T.J. Martell Foundation is the music industry's leading foundation that funds innovative medical research focused on finding treatments and cures for cancer.  The Foundation raises money for cancer research by soliciting in-kind donations from celebrities and then auctioning off those donations for a profit.  Goodwin had been employed at the Foundation since 2005 and was the Executive Vice President and General Manager of the Foundation from 2018 until July 2020.

According to the charging document, between July 2018 and June 2020, Goodwin devised a scheme to defraud the T.J. Martell Foundation by purchasing approximately $3.96 million in tickets from online ticket vendors Ticketmaster, Stubhub, Primesport, and On-Location, using a Foundation credit card she had obtained in her own name.  These tickets were not for a legitimate Foundation purpose and included tickets to musical concerts such as Lady Gaga and Celine Dion, and some were to sporting events, such as Super Bowl LIV, which was scheduled to take place in Miami, Florida, on February 2, 2020.

Goodwin provided these tickets to an individual in New York City who owned and operated a charity auction business.  This business conducted auctions for clients, offering consignment items such as event tickets and sports memorabilia to the clients for use in their auctions.  As part of the scheme, Goodwin led this individual to believe that she had acquired the tickets at no cost or at a discounted rate.  Goodwin also used the Foundation's credit card to purchase other items that were not for legitimate Foundation purposes, such as expensive and rare alcohols, plane tickets, and hotel stays.  She then used the Foundation's bank accounts to pay the credit card charges. 

In order to conceal the ticket purchases, Goodwin provided falsified credit card statements and false expense reports to the Foundation's accounting firm.  Goodwin falsified the credit card statements by altering them to conceal the ticket purchases, as well as other expenses.  She often replaced the name of the actual vendor with the name of a different vendor so that the charges appeared to be legitimate Foundation expenses.  In total, Goodwin concealed over $3 million in fraudulent credit card expenses.

The Foundation's accounting firm prepared the Foundation's periodic financial statements based on these falsified credit card statements and expense reports.  The accounting firm then emailed those statements to Goodwin, whose job it was to provide them to the Foundation's CEO. 

However, before providing them to the CEO, Goodwin falsified those financial statements by inflating the Foundation's assets and lowering its liabilities to make the Foundation appear to be more liquid than it was at the time.  These falsifications prevented the Foundation from detecting Goodwin's fraudulent transactions.

In addition to falsifying the credit card statements and financial statements, Goodwin forged the signature of the Foundation's CEO on six checks totaling $966,275.78 that were not approved by the Foundation.

[B]etween January 2008 and June 2018, Perry Santillo conspired with Christopher Parris and others, to obtain money through an investment fraud commonly known as a Ponzi scheme. In 2007, Santillo and Parris, as equal partners, formed a business known as Lucian Development in Rochester, which raised millions of dollars from investors in Rochester, and elsewhere, by soliciting investments for City Capital Corporation, a business operated by Ephren Taylor. In July 2007, Santillo and C.P. were advised by Ephren Taylor that their investors' money had been lost. In response, in August 2007, Santillo and Parris agreed to acquire the assets and debts of City Capital Corporation. The acquisition proved financially ruinous, with the amount of the acquired debt far exceeding the value of the acquired assets. Taylor was later prosecuted and convicted of operating a Ponzi scheme.

Subsequently, Santillo and Parris chose not to disclose the truth to investors that their money was gone. Instead, they continued to solicit ever-increasing amounts of money from new investors in an unsuccessful attempt to recoup the losses. In order to find potential investors to solicit and defraud, Santillo and Parris purchased the businesses of at least 15 investment advisors or brokers, located in Tennessee, Ohio, Minnesota, Nevada, California (5 businesses), Florida, South Carolina (2 businesses), Texas, Pennsylvania, Maryland, and Indiana. Over the years, to keep the Ponzi scheme from being detected, a substantial portion of incoming new investor monies were depleted by making promised interest and other payments to earlier investors. Most of the rest of incoming investor money was used by Santillo and Parris to finance lavish lifestyles, expand the scheme by purchasing investment advisor/brokerage businesses to obtain access to fresh investors, and to pay operating expenses - salaries for a sales force and administrative staff, office rents and related expenses, housing for employees, and interest on loans. 

Between January 2012 and June 19, 2018, Santillo and Parris obtained at least $115.5 million from approximately 1000 investors. By the time the scheme collapsed in late-2017/early 2018, Santillo and Parris had returned approximately $44.8 million to investors as part of their scheme but continued to owe investors approximately $70.7 million.

 "2 Pleas, 2 Federal Courts,1 Horrific Ponzi Scheme, And Lots Of Lousy Wall Street Regulation" (BrokeAndBroker.com Blog / November 6, 2019) 

http://www.brokeandbroker.com/4895/perry-santillo-ponzi/

I have provided the extensive above quotes from the two DOJ Release because of my familiarity with the cases and my personal interaction with several victims. Frankly, the stories of the families defrauded by the participants in this scheme are horrendous. I spoke with family-members and caregivers who related stories of victims who were lured into these bogus investments at times when they were suffering from terminal cancer, dementia, or severe disabilities. Unfortunately, it was my experience that the victims and their families were not afforded timely, substantive, or compassionate assistance by many of the regulators and prosecutors involved. 

In some instances, I personally spoke with the regulatory community and I too came away with the sense that no one wanted ownership of the fraud -- or responsibility for allowing it to persist for a decade. For some victims, their experience was the frustration of being shuttled from FINRA to the SEC to the FBI to the Department of Justice and back into that endless loop of useless referrals to nowhere. Moreover, frequent pleas for information and guidance were responded to with what was often viewed as disinterest or a shocking lack of empathy. 

"FINRA Buries The Lede With FAS Rep Settlement" (BrokeAndBroker.com Blog / June 26, 2017)

http://www.brokeandbroker.com/3510/fas-finra-awc/

• Securities Industry Commentator
• Bill Singer