Broker Fraud

Alleged Unauthorized Trades by IFS Securities Trader Causes $10M in Losses

Published on: August 20, 2019 | by Shepherd Smith Edwards & Kantas, LLP

According to InvestmentNews, IFS Securities, a broker-dealer based in Atlanta, Georgia, may be facing at least $10M in losses after Keith Wakefield, the firm’s ex-municipal securities principal, allegedly executed unauthorized trades and shorted Treasury bonds. He was fired earlier in August 2019.

IFS Securities is owned by IFS Group Inc. The brokerage firm reportedly notified the Financial Industry Regulatory Authority (FINRA), the US Securities and Exchange Commission (SEC), and the Federal Bureau of Investigation (FBI) about the significant losses it sustained due to the unauthorized securities transactions that reportedly did not involve any customer assets. IFS Group works with institutional investors.

Wakefield was with IFS Securities since 2011. His BrokerCheck record cites allegedly making fake trades and fraud as the reasons for his termination. With 19 years as a registered broker, Wakefield was previously with Cabrera Capital Markets, LaSalle Financial Services, and ABM Amro Inc.

Two Former Brokers Sentenced in Multimillion-Dollar Ponzi Frauds

Published on: August 13, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Dawn Bennett, an ex-financial advisor and broker, is sentenced to 20 years in prison for operating a $20M Ponzi scam that involved 46 investors. She also must pay $14.5M in restitution and forfeit another $14M.

Many of Bennett’s victims were retirees who heard about her because she hosted a radio show. In 2018, Bennett was convicted by a jury on federal charges of conspiracy, bank fraud, securities fraud, wire fraud, and making false statements on a loan application.

According to evidence given at trial, Bennett solicited investors for her online clothing business DJB Holdings, LLC, also known as DJBennett.com, touting a 15% yearly interest rate through promissory and convertible notes.

Ex-Wells Fargo Broker and Advisor Are Accused of Misconduct

Published on: August 9, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) has taken action against two former Wells Fargo (WFC) representatives. Ex-broker Michael Garris has been suspended for a year after the self-regulatory organization found that he made 26 unauthorized trades in the account of a client who he knew had died.

Garris was fired by Wells Fargo over a year ago. According to FINRA, he made more than $9K in commissions from the unauthorized transactions in late 2017, several months after the client’s nephew had notified him of the death. Garris failed to tell the brokerage firm of the client’s passing.

Wells Fargo has since refunded the commissions that Garris made from the transactions, reversed the transactions that were not authorized, and placed the account back to its former positions from before the customer died.

56 Brokerage Firms to Pay $89M to Retirement and Charitable Accounts

Published on: July 26, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority (FINRA) announced that because of its mutual fund waiver initiative, it has arrived at a settlement with 56 broker-dealers that will provide almost 110,000 retirement and charitable accounts with $89M in restitution.

Two of the firms, Western International Securities and Park Avenue Securities, settled on the same day that the self-regulatory organization (SRO) announced the multi-firm resolution. According to FINRA, the brokerage firms neglected to wave mutual fund sales charges for accounts that were eligible and they did not properly supervise the sales.

FINRA’s Mutual Fund Waiver Initiative

Fidelity’s National Financial Services Orders GPB Private Placements Removed

Published on: July 25, 2019 | by Shepherd Smith Edwards & Kantas, LLP

National Financial Services, which is Fidelity Investments’ clearing and custody unit, has given its brokerage firm clients 90 days to get rid of all GPB Capital Holdings private placements from its platform. The announcement means that investors and their financial advisers will have to move their GPB fund assets to a different custodial firm. Considering that there are a lot of broker-dealers who use National Financial as their primary custodial firm and to clear the investments of clients, the decision is likely to impact a lot of parties.

A main reason for the edict is that, reportedly, neither Fidelity nor National Financial are clear about the actual value of the GPB private placements. Third-party vendors typically provide this information. According to InvestmentNews, Fidelity spokesperson Nicole Abbott said that at the moment GPB is not meeting her company’s policy regarding alternative investments.

In Trouble with Investors and Regulators

Aequitas Ponzi Fraud Case Results in $234.6M Settlement

Published on: July 16, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Investors who lost money after investing in Aequitas Management LLC, which is accused of running a $350M Ponzi scam, have arrived at a $234M settlement in their fraud case against EisnerAmp LLP, Deloitte & Touche LLP, TD Ameritrade, Duff & Phelps, Sidley Austin LLP, Integrity Bank and Trust of Colorado, and Tonkon Torp. The defendants are accused of playing a part in the plaintiff’s losses because of their purported involvement in the sale of Aequitas securities.

More than 1,500 investors collectively invested over $350M in Aequitas securities while thinking that they were backing trade receivables in healthcare, education, transportation, and other areas. This investor fraud case, Ciuffitelli et al v. Deloitte & Touche LLP et al, was brought as a proposed class action and filed over three years ago by claimants in Oregon and California.

Based on a complaint brought also in 2016 by the US Securities and Exchange Commission (SEC), Aequitas is accused of misleading investors about the extent their money became involved in for-profit education company Corinthian Colleges, which filed for bankruptcy in 2015. The regulator accused Aequitas of becoming a Ponzi scam after Corinthian failed, with the company continuing to sell securities for the purposes of paying back earlier investors and to support its executives’ expensive lifestyles.

CYES Strategy Investments Prove Too Risky for Investors

Published on: July 15, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Over the last several months, it has come to light that brokers from some of the largest firms on Wall Street firms sold Collateral Yield Investment Strategies (CYES Strategies) that may not have been suitable for many investors, causing them to suffer devastating losses. Offered through registered investment adviser Harvest Volatility Management, LLC, the CYES Strategy is a type of Yield Investment Strategy (YES Strategy), only even more risky and complex.

YES Strategy Investments

Reportedly, UBS (UBS), Credit Suisse (CS), Bank of America’s (BAC) Merrill Lynch, Morgan Stanley (MS), and other brokerage firms brokers sold YES Strategies to many wealthy investors, touting the approach as safe way to increase returns on conservative portfolios. These were supposed to be small returns at a low risk, using a strategic approach that involved the purchasing and selling of SPX index options spreads.

Summit to Pay Over $880K for Excessive Trading, Inadequate Supervision

Published on: July 11, 2019 | by Shepherd Smith Edwards & Kantas, LLP

For alleged supervisory failures and excessive trading by one of its former brokers, Summit Brokerage Services, Inc. has been ordered to pay over $880K– $558K in restitution with interest to customers that were harmed, as well as a $325K fine to the Financial Industry Regulatory Authority (FINRA). The broker-dealer consented to the entry of the findings but did not admit to or deny wrongdoing.

According to the SRO, from 1/2012 to 3/2017, Summit neglected to review certain automated alerts for the trading activities of its registered representatives, of which there are more than 700. Because of this, one of its brokers, was able to excessively trade in accounts belonging to 14 clients, including 533 trades on behalf of one customer. This compelled her to pay over $171K in commissions.

The broker’s excessive trading resulted in 150 alerts for this type of activity, none of which were purportedly reviewed by Summit. FINRA has since barred the former registered rep.

Former LPL Broker and Ex-Convict Accused in $3.3M Investor Fraud

Published on: July 10, 2019 | by Shepherd Smith Edwards & Kantas, LLP

Ex-target=”_blank” rel=”noopener noreferrer”>LPL Financial (LPLA) broker, Kerry L. Hoffman, is now facing fraud charges brought by the US Securities and Exchange Commission (SEC). Hoffman is accused of fraudulently selling $3.3M of unregistered securities, along with childhood friend Thomas V. Conwell, who is also a defendant in the civil case. The latter was barred by the regulator from the industry in 2000 after a separate $800K fraud that harmed 19 investors. Conwell pleaded guilty to criminal fraud charges against him and was sentenced to time in prison.

According to the SEC’s current complaint, the two men defrauded at least 46 investors in a dozen states by selling GT Media, Inc. securities to them. Hoffman was a registered LPL Financial broker during most of the time of the fraud, which allegedly took place between July 2015 and July 2018. He resigned from the firm in the wake of allegations that he served as consultant to GT Media without getting LPL’s approval or notifying the firm about these outside activities. He also was accused of helping a number of LPL clients and his own family members to invest in the company.

Hoffman allegedly offered and sold $350K of GT Media convertible promissory notes and $500K of the company’s stock to five advisory clients, making $50K in commissions. The Commission is accusing him of soliciting some of his advisory clients to invest in the unregistered securities but without letting them know that he had a conflict of interest. Not only was GT Media paying him compensation, but also the company was paying back money he had let it using investors’ money.

Legend Securities to Pay Almost $967K to Investor

Published on: July 9, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Regulatory Authority (FINRA) panel is ordering Legend Securities, CEO Anthony Fusco, and three of the firm’s former brokers to pay one investor $966,708 in damages. Legend Securities was expelled by the self-regulatory authority two years ago and is no longer in operation.

The claimant, Frederick Blake, alleged the following:

- Churning