Investor Fraud

Investor Fraud: FINRA Awards Over $1M in Churning Case Against Legend Securities and Morgan Stanley Financial Adviser is Sentenced After Spending Over $950K of Clients’ Money

Published on: November 30, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Legend Securities Ordered to Pay Client For Churning His Funds

A Financial Industry Regulatory Authority (FINRA) panel has awarded Herbert W. Voss $1.075M in his securities fraud case against Legend Securities Inc., its ex-chief compliance officer Frank Philip Fusco, and former Legend broker Danard Warthen Brown. Legend is no longer in operation and was expelled by the self-regulatory authority (SRO) in 2012.

Voss reportedly lost $375,000 while Legend was his brokerage firm. Of the more than $1M award granted to Voss, $700K is for punitive damages. His securities fraud lawyer contends that punitive damages were warranted because of how much turnover took place in Voss’s account.

Investor Fraud: Investment Adviser Pleads Guilty to Retirement Fund Fraud, Stock Research Firm is Sued in Alleged Pump-and-Dump Scam That Targeted Seniors, and A Rabbi is Accused of Running a $35M Ponzi Scam

Published on: November 23, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Investment Adviser Accused of Lying to Retirement Fund Clients Pleads Guilty

Richard G. Cody, an investment adviser who ran Boston Investment Partners and is accused of lying to clients about how he handled their retirement funds, has revised his not guilty plea. Cody is now pleading guilty to both making a false declaration under oath and investment adviser fraud.

According to The U.S. Attorney’s Office for the District of Massachusetts, Cody allegedly lied to at least three investors who had relied on him to manage their retirement savings. The investment adviser is accused of fabricating documents so it would look as if their funds were still in the accounts even though hundreds of thousands of dollars had disappeared.

GPB Capital Holdings’ Auditor Resigns Within Months of Private Placement Sales Suspension

Published on: November 19, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Already under scrutiny for suspending its sale of private placements, along with redemptions to investors, GPB Capital Holdings now has to explain why its accountant, Crowe LLP, has resigned as the alternative asset management firm’s auditor. GPB Capital had announced a few months ago that it was undergoing an accounting overhaul and that this was why it had failed to submit financial statements for its two biggest funds – the GPB Holdings II and the GPB Automotive Portfolio – to the U.S. Securities and Exchange Commission (SEC) earlier this year. These private placements primarily invest in waste management businesses and car dealerships.

According to GPB Capital CEO David Gentile, Crowe has resigned because of “perceived risks” that the accounting firm felt were outside its “internal risk tolerance parameters.” GPB Capital has since retained EisnerAmper, LLP as its replacement auditor.

Such a significant change at such an important time period should raise significant concerns to those who have invested in GPB Capital Holdings private placement deals. GPB Capital Holdings has at least nine different funds including the two mentioned above (GPB Automotive Portfolio and GPB Holdings II) as well as GPB Holdings III, GPB Cold Storage, GPB NY Development and GPB Waste Management.

Former Next Financial Investment Adviser and Broker Pleads Guilty to Multimillion-Dollar Investor Fraud Charges

Published on: November 9, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Douglas P. Simanski, a former Next Financial investment adviser and broker, has pleaded guilty to a $4.5M investor fraud for the criminal charges of wire fraud, securities fraud, and submitting false income tax returns. He is accused of bilking over 30 clients over a 14-year period.

According to the US Attorney’s Office for the Western District of Pennsylvania, between February 2002 and May 2016, Simanski “fraudulently obtained” about $4.5M from investors. He “fabricated” contracts for “Tax Free Investments” and “fake CDs” that came with a list of guaranteed return rates and payouts. The bogus documents were used to solicit investors.

Simanski went on to use some of the investors’ funds to issue returns to other investors to make it seem as if the “investments were legitimate.” He also used some of their money for personal spending and in his own E*Trade account. The former Next financial broker is accused of turning in income tax returns that were “false.”

Investor Fraud: Boston Hedge Fund Manager Pleads Guilty in Ponzi Scam Case, Ex-State Street Executive is Sentenced to 18 Months, and Willow Creek Fund Manger Must Forfeit $13M

Published on: October 29, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Man Who Ran RMA Strategic Opportunity Fund Ponzi Scam Pleads Guilty

Raymond K. Montoya, a Boston hedge fund manager, has pleaded guilty to operating a multi-billion dollar Ponzi scam involving the RMA Strategic Opportunity Fund, LLC. Montoya pleaded guilty to multiple counts of mail fraud, wire fraud, and conducting an unlawful monetary transaction.

Montoya was charged and arrested last year. His victims included relatives, friends, and people he knew. They invested millions of dollar, including their savings and retirement funds.

Investment Advisor Fraud: Dawn Bennett is Convicted in $20M Ponzi Scam, Guilty Plea Reached in $6.1M Fraud, and Genesis Advisory Services Operator Settles SEC Charges

Published on: October 18, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Former Financial Adviser Now Facing Years in Prison for $20M Investor Fraud

Dawn Bennett, an ex-financial adviser and the operator of Bennett Financial Group Services, has been convicted of 17 criminal charges, including securities fraud, conspiracy, bank fraud, wire fraud, and making false statements on a loan application. It took a federal jury less than five hours to convict her for a $20M ponzi scam that defrauded nearly four dozen investors, including many older investors and retirees. Some of her advisory clients took money out of their retirement accounts to invest with Bennett.

Prosecutors contend that the former financial adviser, who is also an ex-radio show host, used investors’ money to pay back earlier investors in Ponzi-like fashion and to fund her luxury lifestyle. This purportedly included paying priests in India to conduct religious ceremonies to keep regulators away, a $500K luxury suite at the Dallas Cowboys’ stadium, and cosmetic surgery procedures.

Investor Fraud: Man Who Solicited Women He Dated is Convicted, Real Estate Developer is Accused in $16M Financial Scam Turns Himself In, and Couple Allegedly Promised Over 2200% in Investment Returns

Published on: October 12, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Man is Convicted in $2.2M Investment Fraud

A federal jury has convicted a Pennsylvania man on 16 counts of securities fraud, 12 counts of wire fraud, four counts of money laundering, one count of mail fraud, and one count of tax evasion in a $2.2M investment scam. Thomas H. Connerton is accused of defrauding 50 people, including several women that he met through online dating. He was the CEO, president, and founder of Safety Technologies, LLC.

Founded in 2006, Safety Technologies was supposed to develop and commercialize materials that were resistant to cuts and punctures and which could be used to make surgical gloves and related products. Starting in 2009, Connerton began persuading investors to buy securities in Safety Tech. The investments were not registered with the US Securities and Exchange Commission.

SEC and CFTC File Multiple Binary Options Fraud Complaints Accusing Marketers of Defrauding Investors of Millions of Dollars

Published on: October 1, 2018 | by Shepherd Smith Edwards & Kantas, LLP

In multiple federal civil complaints alleging binary options fraud, the US Securities and Exchange Commission is accusing a number of marketers of defrauding at least 75,000 investors—including retired investors and other retail investors, through the use videos that made false promises that they could make money fast. Investors were allegedly bilked of tens of millions of dollars.

The regulator is charging All In Publishing, LLC, Berry Media Works, LLC, and 10 individuals. The regulator SEC that the marketers sought to “trick” their targets into setting up brokerage accounts and trading in binary options, which are high risk securities.

The marketing campaigns promised investors they would make a lot of money if they set up the binary options account via “free or secret software systems” and then traded in these securities. Meantime, every time an investor set up and put money in a brokerage account, the marketers made money.

Texas Investor Fraud: Investment Adviser is Barred in $6.8M Offering Fraud and Investment Promoter Gets 25 Years in Prison for Stealing from Clients

Published on: September 27, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Thomas J. Caufield, an investment advisor and the owner of and a Dallas-based investment education franchise, is now barred by the Securities and Exchange Commission. The regulator recently charged Caufield with investor fraud, accusing him of lying to over 30 investors in a $6.8M offering fraud.

According to the SEC, from at least early 2013 through December 2017, Caufield, who is from Colleyville, Texas, promised investors substantial returns if they invested in the high-yield promissory notes for what he touted was a profitable franchise. The investment advisor claimed that their money would go toward acquiring and running a franchise that would provide education programs. Instead, Caufield allegedly used a substantial portion of the over $6M in investor funds pay back earlier investors and take care of overdue franchise fees.

The Texas investment advisor is accused of providing materials with false information and making false pitches to prospective investors, including the franchise’s students and clients of DAT Capital Advisors, which was the investment adviser that Caufield owned and used to be registered in the state. Caufield allegedly did not disclose that the franchise was in poor financial health.

Investor Fraud: Barred Michigan Investment Adviser is Accused of Defrauding Retirees of $2.7M and SEC Halts Alleged $345M Ponzi Scam That Bilked Seniors, Retail Investors, and Small Business Owners

Published on: September 20, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Former Michigan Financial Adviser Faces SEC Charges in $2.7M Investment Scam that Defrauded Seniors

The US Securities and Exchange Commission has filed fraud charges against Ernest J. Romer III, a former Michigan-based financial adviser with 47 disclosures on his Broker-Check record and who was barred by FINRA last year. Romer also pleaded no contest to embezzlement in July and is awaiting his sentence. According to the regulator, between 2014 and 2016, the ex-financial adviser defrauded unsophisticated investors and older retirees of $2.7M.

The regulator contends that Romer convinced at least 30 clients to “sell securities in their brokerage accounts” and transfer their proceeds to the companies CoreCap Solutions or P & R Capital. He purportedly gave them the impression that these were affiliated brokerage firms when, in fact, they were businesses that Romer owned. Many of these investors entrusted him with their life savings.