Jefferies Group

Securities Fraud Cases: Connecticut-Based Investment Adviser Settles Fraud Charges that Allegedly Involved Secret Referral Fees, Jefferies Bond Trader’s Second Criminal Fraud Trial is Underway, Former Barclays Trader Gets 5-Month Prison Term in Insider Case

Published on: January 11, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Investment Adviser Settles SEC Case for $575K
John W. Rafal, a Connecticut-based investment adviser, has agreed to settle US Securities and Exchange Commission charges for $575K. As part of the settlement, Rafal is admitting wrongdoing in a civil case that accuses him of bilking a client and then trying to mislead the SEC while lying to other clients about the regulator’s probe.

The SEC said that Rafal paid attorney Peter D. Hershman in secret for referring one of his client’s to Essex Financial Services, which is the firm that Rafal founded. He is no longer affiliated with Essex. Rather than disclose the referral deal to the older widow who was that client, Rafal and Hershman concealed the payments as “legal fees.” Even after Essex officers found out about and stopped the referral arrangement, the deal between the two men continued in secret. The SEC also said that Rafal responded to rumors that he had violated a securities law by emailing his clients and falsely stating that the regulator’s probe had been resolved. He also purportedly tried persuading the Commission that his arrangement with Hershing was over.

Essex Financial Services will pay $180K in disgorgement and interest to resolve charges connected to Rafal’s wrongful behavior. Herhsman will pay over $90K to resolve the civil charges accusing him of aiding and abetting the violations committed by Rafal. The two men agreed to a securities industry bar and from serving in the roles of director or officer for any publicly traded company. They also are no longer allowed to represent clients regarding SEC matters.

Securities Headlines: Ohio Financial Adviser Faces Criminal Charges, Petters Ponzi Scam Investors Still Waiting for Their Money, and FINRA Recommends Disciplinary Action Against Ex-Jefferies Bond Trader

Published on: January 15, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Ohio Financial Adviser is Indicted in $15M Securities Fraud
Evolution Partners Wealth Management owner Larry Werbel has been indicted on criminal charges accusing him of involvement in a securities scam to bilk at least 100 investor of over $15M. Werbel recruited investors for shares of VgTel Inc. He and other brokers purportedly promised high dividends even though the shares were sold and purchased by companies belonging to the alleged scammers so that they could artificially inflate the share price.

According to prosecutors, over $9M of investor funds were pockets by the fraudsters. Werbel, who prosecutors say got investors to purchase $3M in VgTel shares, received over $300K in kickbacks.

He is charged with securities fraud, conspiracy to commit securities fraud and wire fraud, investment adviser fraud, wire fraud, and making false statements to federal officers. Werbel claims he is innocent.

Meantime, the man accused of masterminding the securities scam, Edward Durante, was arrested in Germany and brought back to the US last month. He previously was convicted of securities fraud in 2011. The U.S. Securities and Exchange Commission has filed a civil case against Evolution Partners, Durante, and others.
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Jefferies LLC Settles SEC Charges for $25 Million

Published on: March 12, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Broker-dealer and investment bank Jefferies LLC (JEF) has consented to pay $25 million to settle Securities and Exchange Commission charges that it did not properly supervise traders at its mortgage-backed securities desk. These same staffers purportedly lied to investors about pricing.

The regulator contends that Jefferies did not give its supervisors what they needed to properly oversee trading activity on the MBS desk and that these managers neglected to find out what bond traders were telling customers about pricing information in terms of what the bank paid for certain securities. This inaccurate information was misleading to investors, who were not made aware of exactly how much the firm profited from in the trading.

While Jefferies’ policy makes supervisors look at electronic conversations of salespeople and traders so any misleading or false information given to customers would be detected, the SEC says that the policy was not effected in a manner that price misrepresentations were identified. The supervisory failures are said to have taken place between 2009 and 2011.

Ex-Jefferies Trader Found Guilty in Securities Fraud Case Over Bond Prices

Published on: March 8, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A jury has convicted Ex-Jefferies Group LLC (JEF) trader Jesse Litvak of securities fraud. Litvak was found guilty of 15 criminal counts, including 10 securities fraud counts related to his misrepresenting bond prices to customers so he could make more money for him and his firm. He pleaded not guilty to all the charges. Jefferies Group is a Leucadia National Corp. (LUK) unit.

According to the government, the 39-year-old trader gave clients inaccurate information about the price of residential mortgage-backed bonds and kept the monetary difference. Litvak, who worked at Jefferies from April 2008 through December 2011, is accused of bilking customers of about $2 million, benefiting himself and his employer.

While Litvak’s legal team tried to persuade a jury that statements Litvak made no difference to customers or their decision of whether to buy the bonds, and that the tactics his client employed are “expected,” the government argued that Litvak’s statements did affect his clients. Litvak was also found guilty of a criminal charge accusing him of fraud related to the Troubled Asset Relief Program.