= = =
3/6/2023
Blackbook Capital Versus FINRA: A Decade of Battle (BrokeAndBroker.com Blog)
https://www.brokeandbroker.com/6913/blackbook-finra-dnj-sec/
Way way back in 2014, a FINRA member firm entered into an Acceptance, Waiver and Consent regulatory settlement involving alleged misconduct in 2010 and 2011. By 2016, the firm seemed to have run into some difficulties and FINRA expelled it. Down but apparently not out, the expelled member firm sued FINRA in federal court in 2019. In 2020, the expelled firm petitioned the Securities and Exchange Commission with discrimination allegations against FINRA. In 2021, the court dismissed the lawsuit. In 2023, the SEC dismissed the application for review. So much for that last decade. What's next? Who knows -- let's just wait and see.
JOIN the Financial Professionals Coalition, Ltd
https://www.finprocoalition.com/
The Financial Professionals Coalition, Ltd. is the one-stop, go-to clearinghouse for financial professionals - registered reps, associated persons, traders, bankers, back-office staff, and owners of broker-dealers and RIAs. Join our network of like-minded professionals. Membership is free.
SEC Charges Rio Tinto plc with Bribery Controls Failures (SEC Release)
https://www.sec.gov/news/press-release/2023-46#
Without admitting or denying the findings in an SEC Order that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934, Rio Tinto plc agreed to pay a $15 million civil penalty
https://www.sec.gov/litigation/admin/2023/34-97049.pdf
As alleged in part in the SEC Release:
[I]n July 2011, Rio Tinto hired a French investment banker and close friend of a former senior Guinean government official as a consultant to help the company retain its mining rights in the Simandou mountain region in Guinea. The consultant began working on behalf of Rio Tinto without a written agreement defining the scope of his services or deliverables. Eventually the mining rights were retained, and the consultant was paid $10.5 million for his services, which Rio Tinto never verified. The SEC’s investigation uncovered that the consultant, acting as Rio Tinto’s agent, offered and attempted to make an improper payment of at least $822,000 to a Guinean government official in connection with the consultant’s efforts to help Rio Tinto retain its mining rights. Furthermore, none of the payments to the consultant was accurately reflected in Rio Tinto’s books and records, and the company failed to have sufficient internal accounting controls in place to detect or prevent the misconduct. The mine has not been developed by Rio Tinto.
SEC Charges Pokerstars Parent Company with FCPA Violations (SEC Release)
https://www.sec.gov/enforce/34-97044-s
Without admitting or denying the findings in an SEC Order that it had violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Securities Exchange Act of 1934, Flutter Entertainment, plc (as a successor-in-interest to The Stars Group, Inc. (the "Company") https://www.sec.gov/litigation/admin/2023/34-97044.pdf agreed to cease and desist from future violations; and to pay a penalty of $4 million. The SEC Order noted Flutter's cooperation and remedial efforts, as well as Flutter's subsequent withdrawal from the Russian market following Russia's invasion of Ukraine in early 2022. As alleged in part in the SEC Release:
[A]t all relevant times, the Company operated a number of gaming brands, including the PokerStars online poker website. The order finds that between May 26, 2015 and May 15, 2020, while the Company's shares were registered with the SEC, the Company paid approximately $8.9 million to consultants in Russia in support of the Company's operations and its efforts to have poker legalized in that country. The SEC's order further finds that, during this time period, the Company failed to both devise and maintain a sufficient system of internal accounting controls over its operations in Russia with respect to third-party consultants, and to consistently make and keep accurate books and records regarding its consultant payments in Russia. According to the order, contemporaneous emails indicate that those payments covered, among other things, (i) reimbursement for New Year's gifts to individuals including Russian government officials, which relevant Company policies prohibited, and (ii) reimbursement of a consultant's payments to Roskomnadzor, the Russian state agency responsible for administering internet censorship filters.
SEC Files Emergency Action Against Miami Investment Adviser BKCoin and Principal Kevin Kang for Orchestrating $100 Million Crypto Fraud Scheme (SEC Release)
https://www.sec.gov/news/press-release/2023-45
In a Complaint filed in the United States District Court for the Southern District of Florida, the SEC charged BKCoin Management, LLC ("BKCoin'') and Min Woo Kang a/k/a "Kevin" Kang with violating the antifraud provision of the federal securities laws. https://www.sec.gov/litigation/complaints/2023/comp-pr2023-45.pdf Also, the Complaint named as Relief Defendants: BKCoin Capital,LP; BK Offshore Fund, Ltd., BKCoin Multi-Strategy Master Fund, Ltd; BKCoin Multi-Strategy Fund, LP, BKCoin Multi-Strategy Fund Ltd; and Bison Digital, LLC. The SEC Release alleges in part that:
[F]rom at least October 2018 through September 2022, BKCoin raised approximately $100 million from at least 55 investors to invest in crypto assets, but BKCoin and Kang instead used some of the money to make Ponzi-like payments and for personal use.
According to the SEC’s complaint, filed under seal on February 23, 2023, and unsealed today, BKCoin and Kang assured investors that their money would be used primarily to trade crypto assets and represented that BKCoin would generate returns for investors through separately managed accounts and five private funds. As the complaint alleges, the defendants disregarded the structure of the funds, commingled investor assets, and used more than $3.6 million to make Ponzi-like payments to fund investors. The complaint also alleges that Kang misappropriated at least $371,000 of investor money to, among other things, pay for vacations, sporting events tickets, and a New York City apartment. According to the complaint, Kang attempted to conceal the unauthorized use of investor money by providing altered documents with inflated bank account balances to the third-party administrator for certain of the funds. The complaint further alleges that BKCoin materially misrepresented to some investors that BKCoin, or one of the funds, received an audit opinion from a “top four auditor,” when in fact neither BKCoin nor any of the funds received an audit opinion at any time.
FINRA Fines and Suspends Rep For Receiving Unemployment Benefits
In the Matter of Joseph Louis Menotti, Respondent (FINRA AWC 2022075173701)
https://www.finra.org/sites/default/files/fda_documents/2022075173701
%20Joseph%20Louis%20Menotti%20CRD%207089872%20AWC%20gg.pdf
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Joseph Louis Menotti submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Joseph Louis Menotti was first registered in. In accordance with the terms of the AWC, FINRA imposed upon Joseph Louis Menotti a $10,000 fine and a nine-month suspension from associating with any FINRA member in all capacities. As alleged in part in the AWC:
In 2020, as a result of the COVID-19 pandemic, the federal government established Pandemic Unemployment Assistance (PUA) for individuals who were ineligible for regular unemployment benefits and were unable to work due to the pandemic. The PUA program generally prohibited PUA benefits to individuals who were teleworking with pay.
In May 2020, Menotti applied for PUA benefits through the Michigan Unemployment Insurance Agency (Michigan UIA), despite the fact that he was earning a salary while teleworking.
Between May and July 2020, Menotti submitted 18 certifications claiming PUA benefits for each week from March 8, 2020, through July 11, 2020. In each certification, Menotti recklessly misrepresented that he did not work full time during the week he requested benefits. In 17 certifications, Menotti also recklessly misrepresented that he did not "do any type of work" or "have any earnings" during the week he requested benefits. In fact, during this period, Menotti was employed full-time by Edward Jones as a registered representative and received a salary.
Based on Menotti's misrepresentations, the Michigan UIA approved Menotti's application for PUA benefits. Menotti received more than $11,000 in PUA benefits to which he was not entitled. Menotti has repaid $1,570 to the Michigan UIA.
In April 2022, Edward Jones commenced an investigation of Menotti's receipt of PUA benefits and terminated Menotti's employment in May 2022. The Michigan UIA also determined that Menotti had not been eligible to receive PUA benefits and that he was improperly paid more than $11,000 in benefits.
Based on the foregoing, Menotti violated FINRA Rule 2010.
FINRA Arbitration Panel Dismisses Something Involving Something Against Wells Fargo by Prominent Whistleblower Analyst
In the Matter of the Arbitration Between David William Maris, Claimant, v. Wells Fargo Securities, LLC, Respondent (FINRA Arbitration Award 20-03466)
https://www.finra.org/sites/default/files/aao_documents/20-03466.pdf
In a FINRA Arbitration Statement of Claim filed in October 2020, associated person Claimant Maris asserted "breach of contract, breach of implied contract, quantum meruit-unjust enrichment, promissory estoppel, and violation of Whistleblower Protection under Dodd-Frank." Claimant sought at least $1.4 million in compensatory damages, at least $2 million back-pay, interest, costs, and fees.The FINRA Award asserts that at the "hearing, Claimant added a claim for damages for retention of Claimant’s Models." Respondent Wells Fargo generally denied the allegations and asserted various affirmative defenses. The FINRA Arbitration Panel denied Claimant's request for monetary damages but ordered Respondent Wells Fargo to return to Claimant Maris "as promised" the referenced "Claimant's Models."
Bill Singer's Comment: Ummm . . . what the hell was that about?
Oddly, painfully, in prose that seems oh-so-carefully chosen, the FINRA Panel "denied" "Claimant's request for monetary damages . . . [and] Any and all claims for relief not specifically addressed herein . . ." It's nice that the arbitrators opted not to award any monetary damages but, y'know, like maybe, if y'all got nothin' else pressin', you might just take a sec here and tell us what happened to the substantive claims made by Maris? I mean, seriously, what claims of his did you dismiss and why? Further exacerbating any understanding of what was and was not dismissed, we have this in the Award:
On February 10, 2021, Respondent filed a Motion to Dismiss Count Five (violation of Whistleblower Protection under Dodd-Frank) of Claimant’s Statement of Claim pursuant to Rule 13504(a)(6)(A) of the Code of Arbitration Procedure (“Code”) (“Motion to Dismiss”). On March 29, 2021, Claimant filed a Response opposing the Motion to Dismiss. The parties waived the requirement to hold a hearing on the Motion to Dismiss. On April 23, 2021, the Panel’s Order granting the Motion to Dismiss was served on the parties.
So . . . in April 2021, the Panel dismissed the Whistleblower Protection count and, here we are, almost two years later, and what exactly was left of the case and how/why did the arbitrators adjudicate as they did? Hey, don't ask me. I have no damn idea because the Award is as terse and non-substantive as could be.
As of March 6, 2023, FINRA's online BrokerCheck discloses that Maris was first registered in 1996 but seems to have ceased being registered upon his January 2020 departure from Wells Fargo Securities. BrokerCheck indicates that since 2013, Maris was employed as an "Analyst:" and, notably, he has no disclosures on the online FINRA database.
Although there is no reference in the FINRA Award or BrokerCheck beyond what is noted above, see:
"For a Whistle-Blower, No Good Deed Goes Unpunished" (New York Times / DealBook by Jess Eisinger / June 1, 2011)
https://archive.nytimes.com/dealbook.nytimes.com/2011/06/01/for-one-whistle-blower-no-good-deed-goes-unpunished/
"Mylan Misled Investors Over EpiPen Pricing Probe, SEC Says" (Bloomberg Law by Matt Robinson and Riley Griffin / September 27, 2019)
https://news.bloomberglaw.com/esg/mylan-sued-by-sec-over-failure-to-disclose-possible-loss
