Articles Posted in Ponzi Scams

FINRA Fines AXA Advisors $100,000 For Allegedly Not Firing Broker who Ran Ponzi Scam Sooner

Published on: March 16, 2012 | by Shepherd Smith Edwards & Kantas, LLP

AXA Advisors LLC will pay a $100,000 fine to settle Financial Industry Regulatory Authority allegations that it delayed too long before firing a broker who was also the mastermind of a Ponzi scam. The financial firm turned in a Letter of Acceptance, Waiver, and Consent prior to there having to be a regulatory hearing, without denying or admitting to the findings, and without an adjudication of any issue. AXA Advisors is a subsidiary of AXA Financial, Inc., which is an AXA Group member.

Kenneth Neely, a former registered representative, started working with AXA in its Clayton, Missouri office in August 2007. FINRA contends that already by then, Neely had been the subject of four client complaints. Three of these were securities arbitrations over business practices he employed with previous employees. (Prior to working at AXA, he was registered with Stifel, Nicolaus & Co., Inc. and UBS PaineWebber, Inc.) The SRO believes that AXA also knew that Neely was having financial problems at the time.

Neely was permanently barred by FINRA in 2009 for running the Ponzi scam, which bilked its victims of $600,000. Many of the investors he defrauded belonged to his church. According to the SRO, Neely to conceal his financial scheme by having investors pay $2K to $3K to his wife. He also created fake invoices to make them appear as if they were actual ownership certificates. He did pay investors about $300,000. A lot of his investors’ money went toward supporting his extravagant lifestyle. Neely eventually pleaded guilty to the federal crime of mail fraud. He was sentenced to 37 months in months in prison and ordered to pay restitution in the amount of $618,270.

Per the AWC, Neely started running a Ponzi scam in 2001 while he was still working at UBS. He continued his fraud operation while at Stifel and when he went to go work with AXA. He persuaded AXA clients, Stifel customers, and others to take part in the St. Louis Investment Club, which was a fake club and put their money in the St. Charles REIT, which was a bogus real estate investment trust. After he admitted to converting and commingling funds. AXA fired him in July 2009.

However, it was as early as 2008, when AXA conducted its yearly audit of Neely, that a review of his computer brought up an Excel spreadsheet noting eight people’s payment schedules. Per the AWC, these people were investors in Neely’s fraud. An AXA examiner asked Neely to explain the spreadsheet and the broker claimed that the figures were for showing a potential client/friend, who wanted to start a business, how to handle his finances. The AWC alleges that this explanation was a false one.

FINRA found that AXA failed to properly supervise or investigate Neely by not responding appropriately to the spreadsheet, his excuses, or the fact that he had a questionable history. AXA has now been both sanctioned and fined.

AXA Fined $100,000 For Not Axing Ponzi Broker Sooner, Forbes, March 15, 2012

Ex-AXA Broker Barred by Finra After Ponzi Scheme, New York Times, July 28, 2009

More Blog Posts:
Stifel, Nicolaus & Co. and AXA Advisors Broker Charged in Ponzi Scheme Victimizing Church Members, Stockbroker Fraud Blog, November 5, 2009
AXA Rosenberg Entities Settle Securities Fraud Charges Over Computer Error Concealment for Over $240M, February 10, 2011 Continue Reading ›

Texan R. Allen Stanford Convicted on 13 Criminal Counts Over $7.2B Ponzi Fraud

Published on: March 7, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Nearly three years after he was indicted for defrauding investors in a $7.2 billion Ponzi scam involving certificates of deposit that are now worthless, a Houston jury has convicted R. Allen Stanford of 13 of 14 criminal counts, including fraud, conspiracy to commit money laundering, conspiracy to commit wire or mail fraud, wire fraud (from April 24, 2006, December 24, 2008, January 5, 2009, and February 12, 2009), mail fraud, and obstructing investigators. The only count jury members found him not guilty of was wire fraud (from February 2, 2006). Collectively, the Texas financier’s convictions carry prison sentences totaling up to 230 years.

Prosecutors depicted Stanford, 61, as a con man that used investors’ money to get very rich and pay for his businesses. (At one point, his net worth was over $2 billion.) They also say he bribed regulators so he could get away with his scam.

During his criminal trial, financial statements e-mails that were presented as evidence and ex-employees who testified helped paint a picture of the Texan as someone who spent 20 years defrauding investors by selling CDs through his bank in Antigua. James M. Davis, who served as former CFO for Stanford’s different companies, also was a witness for the prosecution. He stated that he and Stanford together falsified annual reports, bank records, and other documents to hide the fraud. Prosecutors contended that Stanford lied to depositors from over 100 nations by claiming that their cash was being invested in bonds, stocks, and other securities.

Texas Financier Allen Stanford’s Ponzi Scam: SIPC Asks District Court to Toss Out SEC Lawsuit Seeking to Reimburse Fraud Victims

Published on: March 5, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The Securities Investor Protection Corp. is asking the U.S. District Court for the District of Columbia to reject the SEC’s request for an order that would make it pay back the victim of Texas financier R. Allen Stanford’s $7 Billion Ponzi scam. The brokerage industry-funded nonprofit claims that the Commission has not demonstrated that these investors are eligible to receive this type of coverage from SIPC.

Standing by SIPC is the National Association of Independent Broker/Dealers. The group wrote a letter to SEC Chairman Mary Schapiro contending that forcing the nonprofit to pay back Stanford’s victims is not only a “misfit solution,” but also, it will establish an “unsustainable precedent.”

The SEC’s securities lawsuit against SIPC is an attempt to force a brokerage’s liquidation, which is the first step that SIPC must take under the Securities Investor Protection Act to pay back the clients of its member firms. SIPC, however, has refused to do so on the grounds that Stanford International Bank, which is based in Antigua, is not one if its member firms. Stanford International Bank is the financial firm that issued the more than $7.2 billion CDs that were sold to investors. (It is Stanford Group Co. that belongs to SIPC.) The CDs now have no value.

SEC Gets Initial Victory in Lawsuit Against SIPC Over Payments Owed to Stanford Ponzi Scam Investors

Published on: February 10, 2012 | by Shepherd Smith Edwards & Kantas, LLP

U.S. District Court Judge Robert Wilkins says that the Securities and Exchange Commission doesn’t need to go through a full civil trial in order to make the Securities Investor Protection Corp. start liquidation proceedings to compensate the victims of Allen Stanford’s $7B Ponzi scam for their losses. This ruling is a partial victory for the SEC, which has been trying to get the brokerage industry-funded nonprofit to help the investors recoup their losses. The dispute between the two groups has centered around the interpretation of the SIPC’s mission and whether or not it supports the SEC’s efforts to protect investors.

SIPC had been pushing for a trial. However, Wilkins said that a trial doesn’t comport with the agency’s purpose, which is to give immediate, summary proceedings upon the failure of a securities firm. Wilkins is mandating a “summary proceeding” that would be fully briefed by the end of this month. However, in regards to the SEC claim that it should be able to determine when the SIPC has failed to fulfill its duties, Wilkins said that this was for the court to decide.

SIPC has a reserve fund that is there to compensate investors that have suffered losses because a brokerage firm has failed. Under SIPC protections, customers of a broker that has failed can receive up to $500,000 in compensation ($250,000 in cash). Although not intended as insurance against fraud, SPIC covers the financial firm’s clients but not those that worked with an affiliate, such as an offshore bank. For example, Stanford International Bank is an Antiguan bank, which means that it should fall outside SIPC-provided protections. However, Stanford Group Company, which promoted the CDs to the investors, is a member of SIPC. (Also, SEC has maintained that Stanford stole from the brokerage firms’ clients by selling the CDs, which had no value, and that this was not unlike the Bernard L. Madoff Ponzi scam that credited $64B in fake securities to client accounts.)

Meantime, Stanford has been charged by both federal prosecutors and the Commission with bilking investors when he and his team persuaded them to buy $7B in bogus CDs from Stanford International Bank. He then allegedly took billions of those dollars and invested the cash in his businesses and to support his lavish lifestyle. Stanford’s criminal trial is currently underway.

Wilkins noted that even if the SEC’s lawsuit against SIPC succeeds, this wouldn’t mean that Stanford’s victims would get their money right away. It would still be up to a Texas court to decide on claims filed by former Stanford clients.

Judge Hands SEC Initial Victory In Suit Against Insurance Fund, The Wall Street Journal, February 9, 2012

Securities Investor Protection Corporation
Compensating Stanford’s Investors, NY Times, June 20, 2011

More Blog Posts:
SEC and SIPC Go to Court to Over Whether SIPA Protects Stanford Ponzi Fraud Investors, Stockbroker Fraud Blog, February 6, 2012

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011

SEC and SIPC Go to Court Over Whether SIPA Protects Stanford Ponzi Fraud Investors

Published on: February 6, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is asking District Judge Robert Wilkins to make the federal Securities Investor Protection Corp. set up a claims process for the Ponzi fraud victims of R. Allen Stanford. These investors had purchased $7.2B in certificates of deposit that allegedly ended up being bogus. The SEC is suing SIPC in an attempt to get it to pay Stanford’s investors for their losses.

SIPC is a nonprofit corporation that gets its funding from the brokerage industry. It is supposed to insure clients against losses resulting from broker theft.

The Commission contends that per the Security Investor Protection Act’s Section 16(b), these investors are protected because the money they deposited at Stanford International Bank Ltd. in Antigua to buy the CD’s was considered to have been deposited with Stanford Group Co., which is a SIPC member. The Commission wants the nonprofit corporation, to begin liquidation proceedings in federal court in Texas.

More than $1B in securities fraud claims from thousands of claimants related to the Stanford Ponzi fraud would likely be filed if the judge were to approve the SEC’s request.

The issue here is whether the clients who were victimized by the Stanford Ponzi scam are eligible to have SIPC cover the losses they sustained. SIPC says no. The group doesn’t believe that the Stanford Investments meets the criteria set up by federal law over who can qualify for payouts from such losses.

Attorneys for SIPC claims that the SEC is trying to set up a liquidation proceeding without there having to be a judicial review regarding whether the law would consider Stanford’s investors “customers.” SIPC wants the judge to order the SEC to refile its complaint, allow for discovery, and then determine this point.

Meantime, Stanford’s criminal trial is underway in Texas. Prosecutors are accusing him of bilking investors by getting them to invest in $7B in fake CDs while he used their funds to support his business and pay for an extravagant lifestyle. Stanford has denied any wrongdoing.

At his trial last week, former Stanford Financial Group Co. CFO James M. Davis testified against Stanford. Davis’s testimony against Stanford is part of the plea deal that he struck. Not only was Stanford Davis’s former boss, but also the two were once roommates at Baylor University.

According to Davis, Stanford told executives to falsify investment returns and that his boss threatened to terminate their employment if they ever reported that he borrowed over $2B from his Antigua bank to pay for his extravagant quality of life. Davis, who pleaded guilty to helping Stanford defraud investors, is facing up to three decades behind bars.

SEC Asks Federal Judge to Order SIPC Payout Plan for Stanford Investors, Bloomberg, January 24, 2012
SEC Suit Pursues Payouts by SIPC, Wall Street Journal, December 13, 2011
Allen Stanford Was ‘Chief Faker,’ Ex-Finance Chief Testifies, Bloomberg, February 6, 2012

More Blog Posts:
Jury Trial Begins in Ponzi Scammer Allen Stanford’s Criminal Case, Stockbroker Fraud Blog, January 23, 2012

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

Jury Trial Begins in Ponzi Scammer Allen Stanford’s Criminal Case

Published on: January 23, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Two-and-a-half years after he was arrested for allegedly running a $7 billion Ponzi scam, the criminal trial of Allen Stanford has begun. The Texas financier is charged with 14 counts of fraud, conspiracy to commit money laundering, and conspiracy. He denies any wrongdoing.

Stanford is accused of issuing $7 billion in fraudulent CDs through his Antigua-based Stanford International Bank to investors in over a hundred nations. He then allegedly defrauded them.

Even since his arrest these investors have not recovered any of their money. According to Reuters, a guilty conviction won’t necessarily help his Ponzi victims recoup their losses. Hopefully, however, the Securities and Exchange Commission’s lawsuit against the Securities Investor Protection Corp. will remedy this.

TD Bank Ordered to Pay Texas-Based Coquina Investments $67M Over $1.2 Billion Ponzi Scheme

Published on: January 19, 2012 | by Shepherd Smith Edwards & Kantas, LLP

A jury has decided than TD Bank must pay Coquina Investments $67M for playing an assisting role in attorney Scott Rothstein’s $1.2 billion Ponzi scam. Coquina Investments is located in Corpus Christi, Texas. TD Bank is the US arm of Toronto-Dominion Bank.

The Texas securities lawsuit, filed by Coquina, contends that TD Bank officers had an “active role” in the Ponzi scam. They allegedly helped keep the fraud going by meeting with victims to make it appear as if legitimate business was actually taking place. For example, investors would meet with Frank Spinosa, who was then a TD Bank vice president.

Rothstein would tell investors that they were purchasing stakes in settlements involving sexual and employment discrimination cases that his law firm Rothstein Rosenfeldt Adler, PA had already gathered evidence for or confronted potential defendants. Apparently, the cases and the settlements were all bogus.

Ex-SEC Lawyer to Settle DOJ Charges Accusing Him of Inappropriately Representing Ponzi Fraudster Allen Stanford

Published on: January 12, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Spencer Barasch, a former Securities and Exchange Commission attorney, will reportedly settle the civil charges filed against him by the Department of Justice by paying a $50,0000 fine. He is accused of inappropriately representing Allen Stanford, the ex-billionaire who is facing trial for masterminding a $7B Ponzi scam. Per the planned settlement, Barasch will settle the DOJ charges by paying a $50,000 fine.

It was in 2010 that SEC Inspector General David Kotz issued a report finding that while Barasch was still at the commission he played a part in decisions that were made to quell investigations of Stanford. After Barasch vacated his post at the SEC, he made several attempts to try to represent Stanford. Although the SEC refused each request, Barasch eventually ended up providing Stanford with about seven billable hours in legal counsel.

Federal conflict of interest laws permanently bar ex-government lawyers from appearing in front of or communicating with the US government in certain situations. However, to bring a criminal conflict-of-interest case prosecutors have to prove that the ex-employee contacted the government on behalf of the defendant. As there has been no evidence that this occurred in the matter of Barasch representing Stanford, this is likely why the DOJ opted to pursue a civil case.

Barasch is also expected to settle the Security and Exchange Commission’s disciplinary action against him by consenting to a 6-month ban from being able to practice in front of the commission. He will likely settle this without admitting to or denying wrongdoing.

Meantime, prosecutors are continuing to prepare their criminal case against Stanford, who allegedly bilked thousands of investors when he persuaded them to purchase CDs from his bank in Antigua. He was arrested in 2009. Stanford continues to deny the charges.

Jury selection is scheduled to begin later this month in the criminal trial against him. This week, however, two of Stanford’s lawyers asked a judge to let them quit the ex-billionaire’s case. Robert Scardino and Ali Fazel say that budget limitations are preventing them from doing their job as his defense team. A court has frozen Stanford’s assets.

In addition to the criminal case filed case against Stanford, he also faces SEC civil charges, along with Stanford International Bank (SIB), investment adviser Stanford Capital Management, investment adviser and broker-dealer Stanford Group Company (SGC), Stanford Financial Group (SFG), and two senior company officials. According to regulators, the defendants misrepresented certain CDs as safe investments. Meantime, client’s money was placed in illiquid equities and real estate instead of diversified liquid assets.

Exclusive: Ex-SEC lawyer said to settle Stanford-linked case, Chicago Tribune, January 10, 2012
Ex-SEC Enforcer Settles Stanford Ethics Dispute With U.S., Bloomberg, January 13, 2012

More Blog Posts:
Securities Fraud Lawsuit Names NRP Financial Inc. in $150M Minnesota Ponzi Scam, Stockbroker Fraud Blog, January 10, 2012
SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

Securities Fraud Lawsuit Names NRP Financial Inc. in $150M Minnesota Ponzi Scam

Published on: January 10, 2012 | by Shepherd Smith Edwards & Kantas, LLP

A Minnesota securities fraud lawsuit, filed by court-appointed receiver R.J. Zayed, contends that because NRP Financial Inc. allegedly failed to properly supervise former broker Jason Bo-Alan Beckman, the brokerage firm ended up assisting in one of the largest Ponzi scams that the state has ever experienced. The $150M financial fraud raised $47.3M from at least 143 clients. Over 900 investors sustained losses as a result of the scam.

Beckman worked as an NRP rep between 2005 and 2008. Last year, he was charged with 13 felony counts related to the alleged financial scheme, including the criminal charges of conspiracy to commit mail and wire fraud, mail fraud, aiding and abetting wire fraud, mail fraud, and money laundering. He also is accused of stealing $7M from Global Advisors LLC, which he owns.

Minneapolis money manager Trevor Cook is the supposed chief architect of the Minnesota Ponzi scam. (He is serving a 25-year prison after pleading guilty to tax evasion and mail fraud.) Involving foreign currency arbitrage, investors were allegedly told that yearly returns of up to 12% would be earned with little, if any, risk to their principal if they bought into the program. Beckman made representations about the currency program between 2006 and 2009.

Per the Ponzi fraud lawsuit, the scam would have ended sooner if only NPR Financial had properly supervised Beckman, denied transfer of investors’ funds to bank accounts maintained on behalf of shell entities, looked into improper transfers of clients’ monies that Beckman had made, and refused to let him hide his actions behind its name and reputation. A lot of the parties that invested were clients of Oxford Private Client Group LLC, which is not only a NRP Financial branch, but also it is partly owned by Cook and Beckman.

Oberlin Financial, which preceded NRP, is accused of having known
way back in April 2006 that Beckman had another business involving trading currencies. NPR also allegedly was aware that Beckman used marketing collaterals that made an inflated claim that there was $3.5B in assets under management.

National Retirement Partners Inc., which is NRP Financial’s parent, sold its assets to LPL for $27M. When the deal was taking place, LPL touted the buy as a way to get into the retirement and pension market. However, according to an LPL Investment Holdings spokesperson, the company is not named in the securities complaint and has not been liable in this case. The broker-dealer was not one of the assets that LPL Holdings bought from NRP.

B-D that sold assets to LPL played role in $150M scam: Lawsuit, Investment News, January 6, 2012
Patrick Kiley, two others indicted in Trevor Cook ponzi scheme, CityPages, January 6, 2011

More Blog Posts:
SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011
SEC Charges Father and Son with Utah Securities Fraud In Alleged $220M Ponzi Scam Over Purported Real Estate Investments, Stockbroker Fraud Blog, December 15, 2011
SEC Issues Emergency Order to Stop $26M “Green” Ponzi Scam, Institutional Investor Securities Blog, October 13, 2011 Continue Reading ›

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts

Published on: December 20, 2011 | by Shepherd Smith Edwards & Kantas, LLP

In its latest effort to help investors that lost money in the $7 billion Stanford Financial Group Ponzi scam recoup their losses, the Securities and Exchange Commission is suing the Securities Investor Protection Corporation. Both have been in disagreement over whether Stanford investors qualify for protection against SIPC rules, which are supposed to back brokerage firm client accounts against failure and cover investors for up to $500,000 in losses.

The SEC has said that this coverage should apply to Stanford investors because not only was broker-dealer Stanford Group Company a part of Stanford Financial, but also clients had to set up brokerage accounts to buy the certificate of deposits that their money was placed in. Upon purchase of their CD’s, they were given papers noting that the transaction was SIPC-covered. However, the SIPC, which is not in charge of regulating brokerage firms, contends that because clients’ money was placed in supposedly safe CDs sold by Stanford Financial, investors do not get to avail of this protection.

Now the Commission is seeking a court order that would compel the investor protection corporation to start liquidating Stanford Group Company. This filing is a key step in allowing customers to start getting their money back.

The SEC claims that it is solely authorized to decide whether SIPC should get involved. This is the first time the Commission has pulled rank to force the SIPC to take specific action. If the court grant’s the SEC’s order, SPIC plans to appeal.

Federal authorities seized Stanford Financial in 2009. R. Allen Stanford is accused of running the Ponzi scam and using the money belonging more than 21,000 clients to fund his expensive lifestyle. Investors were promised improbable interest rates that were supposedly spurred by a unique investment strategy.

This week, a hearing to determine whether R. Allen Stanford is fit to stand trial is scheduled to take place. The SEC has sued R. Allen Stanford for securities fraud and he is charged with 23 criminal counts of wrongdoing. Although he remains in federal custody, his criminal trial was delayed to allow him to go into detox for his addiction to anti-anxiety meds and anti-depressants.

One of his defense attorneys claims that the medications and a traumatic brain injury that he sustained when he was beaten in jail have caused him to develop amnesia. Meantime, prosecutors are expected to argue that Stanford is pretending that he severe memory loss.

Allen Stanford’s Move to Trial or Treatment Argued in Court, SF Gate, December 20, 2011
SEC, SIPC ready to rumble over Ponzi payouts, Investment News, December 20, 2011
S.E.C. Files Suit to Recoup Losses in Stanford Case, New York TImes, December 12, 2011

More Blog Posts:
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011
Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal, Stockbroker Fraud Blog, December 2, 2011
Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011 Continue Reading ›