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Former Morgan Stanley Financial Advisor Sentenced to Over 7 Years in Prison for Executing a Multimillion Dollar Ponzi Scheme (DOJ Release)
https://www.justice.gov/usao-ednc/pr/former-morgan-stanley-financial-advisor-sentenced-over-7-years-prison-executing
In the United States District Court for the Eastern District of North Carolina, Shawn Edward Good pled guilty to wire fraud and money laundering; and he was sentenced to 87 months in prison plus three years of supervised release, and ordered to pay $3,619,594 in restitution to victims. As alleged in part in the DOJ Release:

[G]ood was employed as a registered representative and investment advisor for Morgan Stanley Smith Barney, LLC in Wilmington.  From 2012 to February 2022, Good executed a scheme to obtain money through an investment fraud commonly known as a Ponzi scheme.  Specifically, Good solicited investments from business clients and others for purported real estate projects and tax-free municipal bonds, touting these opportunities as low-risk investments that would pay returns of between 6% and 10% over three- or six-month terms.

To effectuate these investments, Good caused some clients to obtain a liquid asset line of credit (LAL) secured by their Morgan Stanley investment or retirement accounts.  Good directed clients to transfer the LAL funds to their personal bank accounts and then wire the funds directly to Good’s own personal bank account. Other victims paid Good by paper check and wire transfers using funds derived from sources other than Morgan Stanley accounts.

At least 12 victims invested approximately $7,246,300 based on false statements and misrepresentations made by Good.  Instead of investing in land development or bonds, Good used the money for personal expenditures including his Wilmington residence; a condominium in Florida; luxury vehicles including a Mercedes Benz, a Porsche Boxster, a Tesla Model 3, an Alpha Romeo Stelvio, and a Lexus RX350; fine dining; and vacations to Paris, France; Cinca Terra, Italy; Jackson, Wyoming; Las Vegas, Nevada; and other destinations.  To lend credibility to the Ponzi scheme and to elude detection, Good also used a portion of investor funds to make payments to earlier investors.

Bill Singer's Comment: Take note -- careful note -- that Good's fraud transpired over a decade . . . not months or a few years. Moreover, those victimized were at least 12 in number and were defrauded to the extent of $7,246,300. Despite all of Wall Street's layers of regulators with their own set of rules and regulations, and the so-called frontline of defense in the form of in-house compliance staff, this fraud continued undetected and unchecked for far too long. That's a sobering lesson and warning!

Two Men Sentenced in Multimillion Dollar Fraud Scheme (DOJ Release)
https://www.justice.gov/usao/pressreleases?f%5B0%5D=news_list_topic%3A3926
In the United States District Court for the Eastern District of Virginia, Carl Anthony McNeill, 59, and Richard Thornhill Crock, 75, were each sentenced to 46 months in prison and ordered to pay, respectively, restitutuion in the amount of over $5.8 million and over $2.4 million. Co-defendants Jayson Ryman Colavalla and Ksyntoilious Miller await sentencing for their roles in the conspiracy. As alleged in part in the DOJ Release: 

[F]rom approximately September 2016 to March 2021, Carl Anthony McNeill, 59, of Mechanicsburg, Pennsylvania, and Richard Thornhill Crock, 75, of Mableton, Georgia, along with other co-conspirators, ran an advance fee scheme targeting individuals, small businesses, churches, and other entities that could not obtain conventional lines of credit though banks. The co-conspirators promised these victims that, using their relationships with major investment banks, the co-conspirators could obtain lines of credit for the victims. The scheme required that the victims advance a deposit consisting of 10-15% of the line of credit sought, representing that the deposit would be held in escrow and returned if they did not obtain the line of credit. In fact, the co-conspirators did not have any relationships with the investment banks mentioned in their dealings with the victims, and did not safeguard the victims' funds in escrow.

The fraudulently obtained funds from victims were misapplied to pay co-conspirators; cover the payroll and operating expenses of C&D Corporate Services, the company McNeill used to commit the fraud; and pay frustrated victims seeking the return of deposited money. Crock also falsely represented to victims that their advanced funds would be insured via policies issued through a Georgia-based insurance company. These policies were also fraudulent, as the insurance company did not have sufficient assets on hand to compensate victims under such policies.

Bill Singer's Comment: Oh for godsakes, seriously? This scam is still extant and folks are still falling for it? Oh well, only goes to show you how a well-used con still retains vitality over the decades. One thing about this DOJ Release that annoys me is the lack of indication as to whether the Defendants were convicted after trial, pled guilty, or any explanation whatsoever as how they came to be sentenced. 

SEC Charges Investment Adviser for Compliance Failures (SEC Release)
https://www.sec.gov/enforce/ia-6315-s
Without admitting or denying the findings in an SEC Order
https://www.sec.gov/litigation/admin/2023/ia-6315.pdf that it had violated Section 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder, Sciens Diversified Managers, LLC (successor to Sciens Investment Management, LLC) consented to a Cease-and-Desist Order, Censure, the payment of a civil penalty of $275,000 on a joint-and-several basis, and undertakings that include retaining an independent compliance consultant. As alleged in part in the SEC Release:

According to the SEC's order, Sciens charges management fees to the private funds quarterly based on its determinations of the fund net asset value, and these funds primarily invest in equity, debt of private companies or assets for which there is frequently no readily available market pricing information and no significant observable inputs are available. The order finds that since at least 2016, Sciens' written policies and procedures were not reasonably designed in light of the nature of the investment mandates of the funds, giving only minimal guidance regarding how to value the investments in accordance with Generally Accepted Accounting Principles and other standards set forth in the funds' offering documents.

SEC Obtains Final Judgments Against Stock Promoter and Microcap Issuer in Penny Stock Fraud Scheme (SEC Release)
https://www.sec.gov/litigation/litreleases/2023/lr25734.htm
In the United States District Court for the Southern District of New York, Final Judgment were entered against stock promoter Eleazar Kauderer
https://www.sec.gov/litigation/litreleases/2023/judg25734-kauderer.pdf and HempAmericana, Inc.
https://www.sec.gov/litigation/complaints/2023/comp25734-hemamericana.pdf Without admitting or denying the allegations in the SEC's Complaint, Kauderer consented to the entry of a final judgment permanently enjoining him from violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder, imposing a five-year penny stock bar and ordering him to pay $888,012 in disgorgement and $23,782.74 in prejudgment interest. Due to Kauderer's significant cooperation, no penalty was sought.The Final Judgment against HempAmericana was entered on default, and enjoined the company from future violations of the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Previously, Final Judgments enjoined four other defendants
https://www.sec.gov/litigation/litreleases/2023/judg25734-gpl.pdf from violating the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. As alleged in part in the SEC Release:

On May 2, 2023, the U.S. District Court for the Southern District of New York entered a final judgment on default against HempAmericana. The SEC's complaint against HempAmericana and others, filed on August 13, 2021, alleged that, from 2017 through 2019, HempAmericana schemed with the largest investor in the company's Regulation A stock offerings to use a significant percentage of the offering proceeds to secretly promote the stock so that the investor could sell its shares at a profit. The promotions funded by HempAmericana did not disclose the source of the funding, or the investor's intent to sell stock during the promotions. HempAmericana allegedly further misled the public by failing to disclose in offering circulars filed with the Commission that a significant percentage of its Regulation A offering proceeds would be used for stock promotion.

CFTC Charges Five Defendants with Fraudulent Digital Assets Trading Scheme (CFTC Release)
https://www.cftc.gov/PressRoom/PressReleases/8706-23
In the United States District Court for the Central District of California, the CFTC filed a Complaint against David Carmona, Juan Arellano Parra, Moses Valdez, David Brend, and Marco A. Ruiz Ochoa all jointly doing business as Icomtech
https://www.cftc.gov/media/8616/enfcarmonacomplaint052423/download . As alleged in part in the CFTC Release:

[F]rom approximately August 2018 through December 2019, to get actual and prospective customers to give them money, the defendants and other Icomtech agents falsely represented they would use the money to trade Bitcoin and other digital asset commodities for the customers; that Icomtech would provide “daily returns” of between 0.9% to 2.8% on the customers’ money from trading; and Icomtech would double the customers’ money in approximately four to eight months from trading. As alleged in the complaint, in actuality, the defendants did not trade Bitcoin or other digital asset commodities for the customers as they said, and did not earn daily returns nor double the customers’ investments based on trading. Instead, the defendants misappropriated the customer funds, and some customers lost all of their money.

Parallel Criminal Action

On October 13, 2022, the U.S. Attorney’s Office for the Southern District of New York (SDNY) unsealed an indictment charging Carmona, Arellano, Valdez, Brend and Ruiz with wire fraud in connection with the Icomtech scheme. United States v. Carmona, 1:22-cr-00551-JLR (S.D.N.Y October 13, 2022), ECF No. 2 (indictment). 

FINRA Censures and Fines Firm for BSA/AML Compliance
In the Matter of Financial Security Management, Incorporated, Respondent (FINRA AWC 2018058111301)
https://www.finra.org/sites/default/files/fda_documents/2021069393901
%20Financial%20Security%20Management%2C%20Inc.
%20CRD%2043000%20AWC%20vr.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, Financial Security Management, Incorporated submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Financial Security Management, Incorporated has been a FINRA member firm since 1997 with 43 registered representatives at six branches. In accordance with the terms of the AWC, FINRA imposed upon Financial Security Management, Incorporated  a Censure and a $25,000 fine. As alleged in part in the AWC:

Between March 2019 and February 2021 FSM lacked reasonable procedures to ensure that a firm employee was actually and timely reviewing and responding to 314(a) requests from FinCEN. During this period, the firm failed to search its records in response to any 314(a) requests. The firm's written procedures failed to designate a
responsible person by name or title. The wTitten procedures also failed to explain any steps the responsible person was supposed to take to search firm. records in response to such requests. In addition, the written procedures failed to state how any such steps
should be documented. The firm designated an employee to complete such searches during the relevant period, but the employee failed to do so and the firm had no process for checking that the searches were being completed. In February 2021, FSM updated its wiitten procedures and systems to address compliance with 314(a) requests.

By failing to establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the BSA and implementing regulations, Respondent violated FIN RA Rules 3310(b) and 2010. 

. . .

Although FSM conducted annual testing of its AML compliance program between 2017 and 2020, the individual who conducted it reported to the firm's AML compliance officer and therefore was not "independent" within the meaning ofFINRA Rule 33I0(c). This individual also lacked training and experience concerning applicable requirements under the BSA and its implementing regulations. Finally, FSM also failed to conduct a risk-based review of its full AML program and its compliance with the BSA mid its
implementing regulations. The testing was limited to the review of a random sample of accounts for compliance with the firm's know-your-customer and customer identification program requirements. The firm took no other steps to review or test any other processes
outlined in the finn's written AML procedures, including its process for searching firm records in response to FinCEN 314(a) requests. Since 2021, FSM has used a qualified outside party to perform annual AML testing.

By failing to conduct annual independent testing of its AML compliance program,Respondent violated FINRA Rules 3310(c) and 2010.  

SCOTUS Reverses 6Cir and Remands to FDIC
HARRY C. CALCUTT, III v. FEDERAL DEPOSIT INSURANCE CORPORATION (Opinion, United States Supreme Court)
https://www.supremecourt.gov/opinions/22pdf/22-714_4315.pdf
 As set forth in SCOTUS' Syullabus:

The Federal Deposit Insurance Corporation (FDIC) brought an enforcement action against petitioner, the former CEO of a Michigan-based community bank, for mismanaging one of the bank’s loan relationships in the wake of the “Great Recession” of 2007–2009. After proceedings before the agency concluded, the FDIC ordered petitioner removed from office, prohibited him from further banking activities, and assessed $125,000 in civil penalties. Petitioner subsequently filed a petition for review in the Court of Appeals for the Sixth Circuit. That court determined that the FDIC had made two legal errors in adjudicating petitioner’s case. But instead of remanding the matter back to the agency, the Sixth Circuit conducted its own review of the record and concluded that substantial evidence supported the agency’s decision.

That was error. It is “a simple but fundamental rule of administrative law” that reviewing courts “must judge the propriety of [agency] action solely by the grounds invoked by the agency.” SEC v. Chenery Corp., 332 U. S. 194, 196 (1947). “[A]n agency’s discretionary order [may] be upheld,” in other words, only “on the same basis articulated in the order by the agency itself.” Burlington Truck Lines, Inc. v. United States, 371 U. S. 156, 169 (1962). By affirming the FDIC’s sanctions against petitioner based on a legal rationale different from the one adopted by the FDIC, the Sixth Circuit violated these commands. We accordingly grant the petition for certiorari limited to the first question presented; reverse the judgment of the Sixth Circuit; and order that court to remand this matter to the FDIC so it may reconsider petitioner’s case anew in a manner consistent with this opinion. 

Watertown Father and Son Sentenced to Prison for Decade-Long Lottery and Tax Fraud Scheme / More than 40 Massachusetts lottery agent licenses to be revoked or suspended (DOJ Release)
https://www.justice.gov/usao-ma/pr/watertown-father-and-son-sentenced-prison-decade-long-lottery-and-tax-fraud-scheme
In the United States District Court for the District of Massachusetts, after a jury trial, Ali Jaafar, 63, and Yousef Jaafar, 29, were convicted of one count of conspiracy to defraud the Internal Revenue Service, one count of conspiracy to commit money laundering and one count each of filing a false tax return; and Ali and Yousef Jaafar were respectviely sentenced to five years in prison and to 50 months in prison, and ordered to pay $6,082,578 in restitution and forfeit their profits. Previously, Mohamed Jaafar, another son of Ali Jaafar, pled guilty to conspiracy to defraud the Internal Revenue Service and awaits sentencing. As alleged in part in the DOJ Release:

In 2019 alone, Ali Jaafar was the top individual lottery ticket casher for Massachusetts. Mohamed Jaafar was the third highest individual ticket casher and Yousef Jaafar was the fourth highest individual ticket casher. The scheme also resulted in federal tax losses of over $6 million, more than $1.2 million of which went directly to the defendants in the form of fraudulent tax refunds.

. . .

Between 2011 and 2020, the defendants purchased winning lottery tickets from individuals across Massachusetts who wanted to sell their winning tickets for a cash discount instead of claiming their prizes from the Massachusetts State Lottery Commission. This allowed the real winners to avoid identification by the Commission, which is legally required to identify lottery winners and withhold any outstanding taxes, back taxes and child support payments before paying out prizes. The defendants recruited and paid the owners of dozens of convenience stores to facilitate the transactions. After purchasing tickets from the lottery winners at a discount, using the convenience stores as go-betweens, the defendants lied to the Commission, claiming the full amount of the prize money as their own. The defendants then further profited by reporting the winnings on their income tax returns and claiming equivalent fake gambling losses as an offset, thereby avoiding federal income taxes and receiving fraudulent tax refunds. 

Woman Guilty of Using Threats and Intimidation to Bilk Elderly Victim Out of More Than $1.6 Million (DOJ Release)
https://www.justice.gov/usao-ndil/pr/woman-guilty-using-threats-and-intimidation-bilk-elderly-victim-out-more-16-million
In the United States District  Court for the Northern District of Illinois, Lee Turner a/k/a "Ashley Turner" pursuant to a Plea Agreement pled guilty to one count of using a facility of interstate commerce to promote and carry on unlawful activity, namely theft and intimidation
https://www.justice.gov/d9/2023-05/0076_-_0000_-_plea_agreement_as_to_lee_turner_rc_.pdf As alleged in part in the DOJ Release:

Turner admitted in a plea agreement that from 2018 to 2021 she communicated numerous threats and fraudulent statements to the victim, who was in his seventies and had limited vision.  Turner’s communications threatened to expose the victim’s purported criminal activity, even though Turner had no knowledge of any such activity committed by the victim.  Turner took on false personas to convey false statements purportedly from others, including alleged gang members, individuals involved in organized crime, prosecutors, journalists, and corrupt law enforcement officers.

In one example cited in the plea agreement, Turner, using the alias “Big Joe,” sent a series of messages to the victim, claiming that the victim had to pay $30,000 to prevent law enforcement from raiding the victim’s residence and a relative’s residence.  On June 13, 2019, the victim paid Turner $30,000 to avoid the purported raids, the plea agreement states.  The money was one of dozens of similar payments, ranging in value from $5,000 to $66,000, that the victim made to Turner.  In all, Turner received $1,611,975 from the victim as a result of the scam, the plea agreement states.

FINRA Censures and Fines J.P. Morgan Securities LLC For Erroneous Orders
In the Matter of J.P. Morgan Securities LLC, Respondent (FINRA AWC 2018058111301)
https://www.finra.org/sites/default/files/fda_documents/2018058111301
%20J.P.%20Morgan%20Securities%2C%20LLC%20CRD%2079
%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, J.P. Morgan Securities LLC submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that J.P. Morgan Securities LLC has been a FINRA member firm since 1936 with over 30,000 registered persons at over 5,400 branches. The AWC asserts in part under the "Background" section that [Ed: footnote omitted]:

In June 2017, the firm consented without admitting or denying the findings to a $800,000 fine and an undertaking imposed by multiple exchanges for violations of Securities Exchange Act of 1934 (Exchange Act) Rule 15c3-5 and applicable exchange rules. The exchanges found, in relevant part, that between May 2012 and April 2016, the firm failed to have reasonable controls to prevent the entry of erroneous orders by rejecting orders that exceed appropriate price or size parameters, or that indicate duplicative orders.

In November 2021, the firm consented without admitting or denying the findings to a fine of $120,000 imposed by Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Cboe EDGX Exchange, Inc., and Cboe EDGA Exchange, Inc. for violations of Exchange Act Rule 15c3-5. These exchanges found that, on August 7, 2018, and December 19, 2019, the firm failed to prevent the entry of erroneous orders because, in part, the firm’s thresholds for size and price controls were too high to be effective, and its supervisory system for review of soft blocks was not reasonably designed. Some of the violative conduct in this AWC relates to the same controls at issue in the aforementioned Cboe settlements.

In accordance with the terms of the 2023 AWC, FINRA imposed upon Respondent JP Morgan Securities  a Censure and a $750,000 fine to be paid jointly to Nasdaq and FINRA  ($187,500 is allocated to FINRA). As alleged in the "Overview" of the 2023 AWC:

From January 2019 to July 2022, the firm’s financial risk management controls and supervisory procedures were not reasonably designed to prevent certain erroneous orders that exceeded appropriate price or size parameters, on an order-by-order basis or over a short period of time, or that indicated duplicative orders. Accordingly, the firm violated Exchange Act § 15(c)(3) and Rule 15c3-5(b) and (c)(1)(ii), and FINRA Rule 2010 

FINRA Suspends Rep Over Private Securities Transaction and Outside Business Activities
In the Matter of Lizbeth Saavedra, Respondent (FINRA AWC 2021072383703)
https://www.finra.org/sites/default/files/fda_documents/2021072383703
%20Lizbeth%20Saavedra%20CRD%206785677%20AWC%20lp.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, Lizbeth Saavedra submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. The AWC asserts that Lizbeth Saavedra entered the industry in 2017 as a Non-Registered Fingerprint individual ("NRF") with PFS Investments Inc. and in that same year became registered. 

In accordance with the terms of the AWC, FINRA imposed upon Saavedra a 60-calendar-day suspension from associating with any FINRA member in all capacities. No fine was imposed in consideration of her financial status. As alleged in part in the "Overview" portion of the AWC:

In September 2020, while associated with PFSI, Saavedra violated FINRA Rules 3280 and 2010 when she personally invested $8,000 in a merchant cash advance company (Company A), without providing prior written notice to, or obtaining written approval for her private securities transaction from, the firm.

From December 2020 to August 2021, Saavedra also violated FINRA Rules 3270 and 2010 by engaging in two outside business activities without providing prior written notice to PFSI. From December 2020 to August 2021, Saavedra worked as an administrative assistant for representatives of, and later directly for, Company A, earning approximately $30,000 in compensation. In January 2021, Saavedra created and registered a limited liability company for business.