Securities Industry Commentator by Bill Singer Esq

FINRA Is Aligning Its MAP CAIF Grouping Model With Firm Tofu And Feedback -- or so it seems (BrokeAndBroker.com Blog)

Former Domino's Pizza Accountant to Pay Nearly $2 Million Penalty for Insider Trading (SEC Release)

SEC Awards $580,000 to Whistleblower Claimant

Order Determining Whistleblower Award Claims

SEC Charges Israeli Corporate Insider and Friend with Insider Trading (SEC Release)

Former Brokers Found Guilty of Fraud Offenses Committed in Fraudulent Stock Offering (DOJ Release)

Albuquerque investment broker pleads guilty to mail and wire fraud and failure to file tax returns (DOJ Release)

Man Charged With Defrauding Customers Who Sought To Buy Cryptocurrency-Mining Computers And Miner-Hosting Services (DOJ Release)

Three Men Charged With Scheming To Create and Sell False Works of Art and Memorabilia (DOJ Release)

FINRA Bars Rep for Reimbursed Expenses

In the Matter of Shawn Parker, Respondent (FINRA AWC)

FINRA Fines and Suspends Rep for Private Securities Transaction

In the Matter of Bruce Cameron Amman, Respondent (FINRA AWC)

FINRA Fines and Suspends Rep for Customer Impersonation

In the Matter of Jonathan William Affe, Respondent (FINRA AWC)

GUEST BLOG: Still Fighting the Wall Street Bullies by Stephen Kohn (BrokeAndBroker.com Blog)

[C]ompton used confidential financial data he obtained through his role as an accountant at the corporate office of Domino's to trade ahead of 12 of the company's earnings announcements between 2015 and 2020. The SEC further alleged that Compton spread these trades across seven different brokerage accounts belonging to himself and various members of his family, which led to illicit profits of more than $960,000.  

[W]hile Claimant's information and assistance were significant in that they helped the staff to more efficiently and quickly conduct the investigation, Claimant was involved in a transaction that gave rise to the Redacted violations described in the Covered Action, Claimant financially benefited from that transaction, and Claimant delayed in reporting for over two years after that transaction, while investors continued to be harmed.

[G]azit, the former head of mergers and acquisitions at Ormat and resident of Tel Aviv, Israel, tipped her close friend, Strugano, an attorney and resident of Caesarea, Israel, with material, nonpublic information she had obtained concerning Ormat's potential acquisition of U.S. Geothermal. The SEC alleges that based on Gazit's tip, Strugano purchased more than 740,000 shares of U.S. Geothermal stock from December 19, 2017 through January 18, 2018. In the months following the merger announcement, Strugano sold all of these shares for a total profit of over $1.2 million.

[B]etween October 2014 and April 2016, Horn, Plummer, and their co-conspirators cold-called prospective investors and made materially false statements and omissions about the offering, including failing to disclose that they would receive exorbitant commissions from selling Sunset stock.  Plummer, who disguised his identity by using the alias "Al Goldstein" when contacting prospective investors, also failed to disclose his extensive disciplinary history in the securities industry, which included cease and desist orders issued by state regulators that prohibited Plummer from engaging in certain securities activities in Arkansas and Colorado. 

The trial evidence further showed that, in connection with the Sunset offering, Horn sent prospective investors Private Placement Memoranda and other written offering materials that included misrepresentations regarding Sunset's purported assets, and how Sunset would use the investors' funds, among other misrepresentations.  Of the approximately $1.6 million raised from investors during the offering, nearly all of the money was diverted away from Sunset and into the pockets of the defendants and their co-conspirators.  Horn and Plummer were formerly licensed by the Financial Industry Regulatory Authority (FINRA) to sell securities, and Plummer was also formerly licensed by FINRA to act an investment advisor, but neither defendant held any active securities licenses during the Sunset offering.

Kessler was a financial advisor and investment broker who did business as Guardian Group Investments, LLC. According to the plea agreement and other court records, Kessler used his position to induce several individuals to entrust their retirement savings to him.  During the period from February to August 2016, Kessler fraudulently convinced four victims to entrust him with a total of $121,267.  Although Kessler had represented that he would place that money in retirement accounts for the benefit of those individuals, Kessler instead deposited their funds in his business bank account, which is specifically prohibited by New Mexico securities regulations. Kessler subsequently converted the victims' retirement funds to his own purposes.  Kessler used the fraudulently obtained money to pay for his personal expenditures and to make payments to earlier victims of his scheme.  In his plea agreement, Kessler admitted that he devised and executed this scheme with the intent to defraud the investors.

Kessler failed to file federal income tax returns for tax years 2014 through 2017.  Kessler's failure to file tax returns and pay federal income taxes resulted in an aggregate tax liability of $82,627 for those four years, not including any penalties or interest.

Since at least 2019, STOJANOVICH has controlled various companies, including Chet Mining Co. LLC ("Chet Mining").  Starting in or about March 2019, STOJANOVICH engaged in a scheme to defraud people who were seeking to purchase Miners and Miner-hosting services through which they expected to obtain "hash power" convertible into cryptocurrency and money.  STOJANOVICH defrauded these victims by falsely telling them that: (1) he would purchase, and had purchased, Miners on their behalf; and (2) he would provide them with Miner-hosting services and had already obtained such Miner-hosting services for them.  In fact, STOJANOVICH failed to deliver the promised Miners and Miner-hosting services.

In all, STOJANOVICH induced more than a dozen customer-victims to pay a total of more than $1.84 million to STOJANOVICH and his companies, ostensibly in return for Miners and Miner-hosting services.  Despite fraudulent representations to the contrary, STOJANOVICH: (1) failed to provide many of the Miners that he told customers he had acquired; (2) failed to provide the hosting services and cryptocurrency hash power that he represented that he would provide; (3) employed deceptive practices to create the illusion that such Miners had been acquired and were being used to provide hash power to those customers; and (4) misappropriated his customers' funds and spent the funds on unrelated and personal expenditures, including by spending a substantial portion those funds on personal expenses, including chartered air flights, hotel rooms, limousines, and private parties.

Defrauding at Least 10 Victims in 2019

In the spring and early summer of 2019, STOJANOVICH fraudulently induced at least 10 customers to pay a total of more than $1.66 million to STOJANOVICH and Chet Mining, in return for Miners and Miner-hosting services.  Between March and July 2019, based on these and other misrepresentations, STOJANOVICH issued at least 15 invoices to these 10 victims, with instructions to make payment to STOJANOVICH or one of his companies.  As directed by STOJANOVICH, these 10 customers paid STOJANOVICH a total of approximately $1,618,000 in bank wires and cryptocurrency transfers.  However, STOJANOVICH failed to provide the Miners and Miner-hosting services that he had agreed to provide and for which he had been paid.

Defrauding 3 More Victims in 2021

In or about August and September 2021, STOJANOVICH induced at least three additional customer-victims to pay him a total of approximately $179,880, as payment for a total of 127 Miners.  Ultimately, STOJANOVICH provided those customers with only 3 of the 127 Miners they had paid for and repaid those customers only approximately $61,000 of the $179,880 they had paid.

The March 2022 Deposition

Several of the victims of the scheme described in the Complaint brought lawsuits against STOJANOVICH in federal court in Manhattan.  In one such lawsuit, Holmes et al. v. Chet Mining, Chet Stojanovich, et ano., Case No. 1:20-CV-04448-LJL (S.D.N.Y.), STOJANOVICH was ordered by the court to appear for a deposition on March 4, 2022.  During that deposition, STOJANOVICH testified falsely on a number of subjects.  For example, in response to several questions, STOJANOVICH testified that he did not know the answers without looking in his personal cellphone, and falsely testified that his phone was downstairs in his rental car or in storage.  The deposition was thereupon adjourned for a half-hour, and STOJANOVICH was instructed to retrieve his cellphone and return to the deposition.  Instead, STOJANOVICH left the deposition and loitered in the vicinity of his car until after everyone else participating in the deposition had left.  Shortly thereafter, he returned to Canada, where he has been residing in recent weeks.

An indictment unsealed today in U.S. District Court in Chicago accuses DONALD HENKEL of altering and applying false autographs or signatures to paintings and memorabilia, including sports, Hollywood, and music collectibles, to make the items appear genuine or more valuable to potential buyers, including art galleries, auction houses, and individuals.  The indictment alleges that Donald Henkel falsely added signatures of artists such as Ralston Crawford and George Ault to paintings that he knew were not created by those artists, and then schemed with his brother, MARK HENKEL, and others to fraudulently present the works as genuine.  Donald Henkel and bogus "straw sellers" recruited by Mark Henkel allegedly provided a false provenance, or history, for numerous items, including a painting by Gertrude Abercrombie and baseballs or bats purportedly signed by Lou Gehrig, Babe Ruth, Honus Wagner, and Cy Young, as a means to falsely portray the items as genuine to potential buyers.  One of the alleged straw sellers - RAYMOND PAPARELLA - schemed to conceal the Henkels' involvement with the items in an effort to pass them off as genuine, the indictment states.

The alleged fraud scheme began in 2005 and continued until 2020.  Many of the forged items were sold for more than $100,000 based on the false histories provided by the Henkels or the straw sellers, the indictment states.

Parker hosted an annual training and educational event for approximately 250 clients during the holiday season at a local banquet venue. At the conclusion of the event, the venue issued an invoice detailing the charges incurred, including the costs of the food and beverages served, which Parker paid. At the conclusion of the annual training events, Parker directed her staff to prepare reimbursement requests to be submitted to the firm, seeking reimbursement for Parker from wholesaler contributions that had been provided for the event. 

For at least the 2017 and 2018 events, the expense reports submitted at Parker's direction contained falsified invoices that overstated the total amount of reimbursable expenses incurred at the event. As a result, Parker received at least $25,000 to which she was not entitled. Parker has since entered into an agreement with the firm to refund the amounts at issue. 

FINRA Rule 2010 requires associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business. Conversion is an intentional and unauthorized taking of and/or exercise of ownership over property by one who neither owns the property nor is entitled to possess it. Conversion of firm funds is a violation of FINRA Rule 2010. Therefore, Respondent violated FINRA Rule 2010. 

Between April 2018 and May 2019, Amman participated in a private securities transaction involving one of his LPL customers. His customer, a sophisticated investor, was selling partnership interests in a limited partnership which would generate large capital gains and he wanted to invest in a specialized tax-advantaged investment that would offset those gains. In April 2018, Amman introduced the customer to a third party with experience in these types of investments. In addition to making the introduction, Amman also provided information about the customer to the third party, participated in two phone calls with the customer and the third party, and facilitated the wire transfer out of the customer's LPL account used to fund the investment. In May 2019, the customer invested approximately $3.5 million in the investment, which was a security and structured as a private placement. The customer did not complain. 

Amman did not provide written notice to LPL prior to his participation in the transaction. Further, in August 2019, when asked on an annual firm questionnaire whether he had participated in a private securities transaction, Amman incorrectly answered "no." 

Therefore, Amman violated FINRA Rule 3280 and 2010. 

[I]n May 2008, Respondent registered as a General Securities Representative through an association with a FINRA member firm. In December 2016, the firm filed a Uniform Termination Notice for Securities Industry Registration (Form U5), stating that Respondent had been permitted to resign on December 13, 2016, after "[a]n insurance company provided the firm with information indicating that [Respondent] called into the insurance company and impersonated clients to gain access to client account information and or change client account information." 

In December 2016, Respondent registered as a General Securities Representative through an association with Vanderbilt Securities, LLC. In September 2020, the firm filed a Form U5 stating that Respondent had been permitted to resign after he "was found to have represented himself as [a] client to Ohio National in order to obtain Variable Annuity contract information on behalf of [the] client. The client confirmed in writing on 8/3/2020 that he had previously given the RR permission to speak to Ohio National in May 2018 at his request." 

In September 2020, Respondent registered as a General Securities Representative through an association with a FINRA member firm. In April 2022, the firm filed a Form US stating that Respondent had been permitted to resign on April 11, 2022, after he "informed the firm that he [was] entering into an AWC relating to his conduct at a prior broker-dealer."

On May 18, 2018, after receiving a warning from FINRA in February 2017 that impersonating customers violates Rule 2010, Respondent impersonated a customer during four telephone calls he placed to an insurance company. Respondent obtained permission from the customer to impersonate him during these telephone calls, which Respondent conducted in the physical presence of the customer at Respondent's office, to obtain information about the customer's existing variable annuity investment. During these telephone calls, Respondent introduced himself to the insurance company as the customer by name and used the customer's personal identifying information for authentication purposes. In addition, during one of the telephone calls, a representative of the insurance company informed Respondent that the representative had reason to believe that Respondent was impersonating the customer. In response, Respondent repeated his claim that he was the customer and ended the call, rather than acknowledging that he was not the customer.

• Securities Industry Commentator
• Bill Singer