Securities Industry Commentator by Bill Singer Esq

Arousing the Wrath of the Great and Powerful SEC and FINRA (BrokeAndBroker.com Blog)

Cybercriminal Connected to Multimillion Dollar Ransomware Attacks Sentenced for Online Fraud Schemes (DOJ Release)

Phony Investment Adviser Sentenced To 16 Years In Prison (DOJ Release)

SEC Awards $1.25 Million to Whistleblower Claimant

Order Determining Whistleblower Award Claims

FINRA Bars JPMorgan Securities Rep for Reversing Bank Fees

In the Matter of Jeffrey Karakatsanis, Respondent (FINRA AWC)

Fines and Suspends Ameriprise Rep for Private Securities Transactions

In the Matter of Jonathan Michael Turner, Respondent (FINRA AWC)

[B]erezan had participated in at least 13 ransomware attacks, 7 of which were against U.S. victims, and that approximately $11 million in ransom payments flowed into cryptocurrency wallets that he controlled.

As reflected in court documents, Berezan used his ill-gotten gains to purchase two Porsches, a Ducati motorcycle, and an assortment of jewelry. In addition, authorities recovered from Berezan's residence currency worth more than $200,000 and electronic devices storing passphrases to bitcoin wallets that contained bitcoin worth approximately $1.7 million, which has been forfeited.

 

Between June 2021 and August 2021, Karakatsanis, without authorization, reversed 81 fees totaling $2,663 charged to his own bank account, and 15 fees totaling $170.24 charged to his friend's bank account, held at his firm's bank affiliate. When Karakatsanis reversed these fees, the bank had already deducted funds from the accounts to pay the fees. Karakatsanis used the computer of another bank employee to reverse the fees without that employee's knowledge or consent. 

By reversing the fees, Karakatsanis caused $2,663 of the bank's funds to be transferred to his own bank account and $170.24 of the bank's funds to be transferred to his friend's bank account. Neither Karakatsanis nor his friend owned or were entitled to possess the funds they received as a result of the fee reversals, and neither returned the funds to the bank. 

By reversing fees charged to his own account without authorization, Karakatsanis converted the bank's funds. By reversing fees charged to his friend's account without authorization, Karakatsanis improperly used the bank's funds

[F]rom 2015 to 2019, Rupp recruited investors by posing as a licensed broker or trader who worked at one of two different brokerage firms.  Rupp told investors that he worked under the supervision of fictitious persons at those firms, one of whom he claimed was his uncle.  Rupp also told investors that the principal of the investments could not be lost for various reasons, including his choice of investments, trading strategy, and insurance.  Rupp fabricated documents as part of the scheme, including false account statements, a fraudulent securities license, and business documents bearing the logos of the companies for which he claimed to work.  Some of the documents stated that he had passed a securities trader qualification examination or that he was registered with the State of Michigan.  These claims, and others he made to induce and retain investments, were false.  In total, Rupp obtained more than $2.7 million from at least 19 investors, misappropriated more than $500,000 of investors' funds, and lost most of the remaining funds trading securities.          

[B]ased on the facts and circumstances of this matter, the Commission finds that Claimant unreasonably delayed in reporting to the Commission. In particular, Claimant waited about a year and a half after internally reporting and approximately three years after first having concerns, to submit information to the Commission. Moreover, the Commission has determined not to waive this criterion under Rule 21F-6(c)(1)(iii).

Applying the award criteria in Rules 21F-6(a) and (b) to the facts and circumstances here, the Commission finds the award percentage determination to be appropriate. In coming to this determination, the Commission considered that: (i) Claimant provided specific and credible information that prompted staff to open an investigation that resulted in the Covered Action, which was based largely on conduct that was the subject of Claimant's whistleblower submission; (ii) Claimant provided continuing, extensive assistance, including helping Commission staff identify witnesses, understand critical documents and terminology, and focus the investigation on key issues, saving Commission time and resources; and (iii) although Claimant internally reported in an attempt to stop the misconduct, Claimant unreasonably delayed in submitting information to the Commission.

In September 2019, Turner accepted a position as Chief Investment Officer for Company X, a credit card processing service, with his employment to start in 2020. As Company X's Chief Investment officer, Turner was responsible for, among other things, creating new investment vehicles and raising investor capital. 

In December 2019, while associated with Ameriprise, Turner participated in $200,000 of private securities transactions by two firm customers. Turner directed the customers to Company X's website, recommended they invest, and supplied them with certain forms needed to purchase Company X's securities. Customer A invested $100,000 and funded the investment with cash from a personal bank account. Customer B invested $100,000, using the proceeds of stock liquidations from an Ameriprise account that Turner facilitated. Turner received no commissions or other compensation regarding these transactions. Turner did not provide written notice to Ameriprise prior to participating in the customers' private securities transactions with Company X. In January 2020, Turner incorrectly certified in the firm's annual compliance attestation that he had not engaged in any private securities transactions that were not previously cleared by the firm. 

• Securities Industry Commentator
• Bill Singer