SEC Enforcement

Castleberry Financial Services is Accused of $3.6M Investor Fraud

Published on: February 28, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission (SEC) has filed fraud charges against Castleberry Financial Services, its president T. Jonathon Turner, and CEO Norman M. Strell accusing them of running an investment fund scam that defrauded at least investors of $3.6M in the last year and continues to solicit new investors. The regulator also announced an asset freeze against the company’s operators. Based in Florida, Castleberry, which is a limited liability company, and its investment offerings are not registered with the SEC.

According to the Commission’s emergency action:

Castleberry falsely represented that it had hundreds of investment properties in its portfolio, as well as hundreds of millions of dollars invested in local businesses. Biz Journals reported that Castleberry touted itself as an alternative investment manager overseeing nearly $800M in capital. Also, in reality, the company never made significant revenue from investments.

Statim Holdings Is Accused of Defrauding Private Fund Arjun and Its Investors

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

The US Securities and Exchange Commission has filed civil charges against Statim Holdings, Inc. and its owner Atlanta investment adviser, Joseph A. Meyer. The regulator is accusing them of defrauding the private fund Arjun L.P., which they managed, and its investors.

Arjun, set up by Meyer in 2007, is a pooled investment vehicle. Its records indicate that its assets under management have never gone over $45M. By the middle of 2009, about 40 investors had invested in the fund, which had lost almost 36% of its value as a result of trading losses.

However, Meyer reported high return rates for Arjun, which caused investors to jump on board. In 2015, Bloomberg News and other services even ranked Arjun as among the best performing hedge funds. Yet it was also at around this time that then-Georgia Secretary of State Brian Kemp, who is now governor, notified Bloomberg that his office was looking into “irregularities” involving Arjun and its owner. The following year, Bloomberg raised questions about Arjun’s performance. In 2017, the SEC opened its own probe into the hedge fund firm and its owner.

Woodbridge and Its Ex-Owner Must Pay $1B Over Alleged Ponzi Scam

Published on: January 30, 2019 | by Shepherd Smith Edwards & Kantas, LLP

A federal court has ordered the Woodbridge Group of Companies and its former CEO and owner Robert H. Shapiro to pay $1B in disgorgement and penalties for allegedly running a $1.2B Ponzi scam that victimized 8,400 retail investors, including many senior investors who ended up losing their retirement money. Of this $1B, Woodbridge and its 281 related companies must pay $892M in disgorgement. Shapiro must disgorge $18.5M in ill-gotten gains, as well as pay $2.1 in prejudgment interest and a $100M civil penalty.

In 2017, the US Securities and Exchange Commission (SEC) filed charges against Woodbridge, which it called a “group of unregistered investment companies,” and other defendants. The regulator contends that Woodbridge claimed that its main business was to issue loans to third-party commercial property owners. The defendant allegedly promised investors 5-10% in interest yearly. The company’s marketing materials touted an “over 90% renewal rate” from investors because of “proven results.”

The SEC said that the reality was that most of these supposed third-party borrowers were, in fact, companies that Shapiro owned. They purportedly made no income and did not pay interest on any of these supposed loans.

Texas Real Estate Developer Faces SEC Charges Over Alleged Multimillion-Dollar Ponzi Scam

Published on: January 28, 2019 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed fraud charges against Phillip Michael Carter, Bobby Eugene Guess, Richard Tilford, and several entities accusing them of operating a multi-million dollar offering fraud. The regulator contends that the three men raised nearly $45 million from more than 270 investors in the US through the sale of high-yield, short-term promissory notes that were touted to prospective buyers as low-risk.

According to the SEC, investors thought they were getting involved in actual real estate development companies but instead ended up buying securities from entities with no assets. Carter, who is the principal of North Forty Development LLC and Texas Cash Cow Investments, is accused of then misappropriating $1.2M in investor funds for his own expenses, including a personal IRS tax lien and to operate a luxury hunting ranch. He also allegedly made over $3M in Ponzi payments that were issued to investors.

Now, the defendants are accused of offering and selling unregistered securities, violating the Exchange Act and the Securities Act, and acting as unlicensed brokers. The entities that are relief defendants in the case include:

SEC Files Charges Against 10 Companies and 13 Unregistered Brokers That Sold Woodbridge Securities in $1.2B Ponzi Scam

Published on: December 26, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed civil charges against a number of companies and brokers who illegally sold Woodbridge Group of Companies securities to retail investors. Woodbridge, which filed for bankruptcy protection last year, its owner Robert H. Shapiro, and several others have since been charged with running a $1.2B Ponzi scam that defrauded nearly 8,500 investors. Many of their victims were older investors who together took almost $400M out of their IRA to invest in the securities.

Now, the SEC is charging 13 unregistered brokers that were among the top sellers of Woodbridge securities. Collectively, they allegedly sold over $350M in the unregistered securities to more than 4,400 investors. The regulator contends that the defendants promoted the Woodbridge securities as “safe” investments, making millions of dollars in commissions from the sales even though they were not registered brokers or even affiliated with a registered brokerage firm and should never have sold the Woodbridge investments to begin with. The brokers named in the SEC broker fraud case include:

• Robert S. Davis, Jr., the VP of Old Securities Financial Group

FINRA and SEC Reportedly Probe GPB Capital Holdings and The Brokerage Firms That Sold Its Private Placements

Published on: December 24, 2018 | by Shepherd Smith Edwards & Kantas, LLP

According to InvestmentNews, sources are reporting that GPB Capital Holdings is now under investigation by both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The probes come just a few months after Massachusetts Secretary of the Commonwealth William Galvin announced that he was conducting a widespread probe into over 60 brokerage firms that sold private placements that came from GPB Capital Holdings. Now, both federal securities regulators are also reportedly looking into these broker-dealers.

GPB, which mostly purchases auto dealerships, raised about $1.8B from investors who bought GPB private placement shares. InvestmentNews reports that according to one brokerage executive, the private placements’ loads were as follows: Investors paid 10% commission to the brokerage firm and financial representative that sold them the shares and they paid 2% went for organization and offering expenses.

Another source reportedly told InvestmentNews that at issue for the SEC in its investigation are:

Financial Firm News: Goldman Sachs Faces Criminal Fraud Charges in Malaysia and UBS is Fined $15M Over Poor Anti-Money Laundering Detection Systems and Multibillion-Dollar Fraud Involving 1MDB Fund Leads to Criminal Charges for Goldman

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

Prosecutors in Malaysia have filed criminal charges against a number of Goldman Sachs Group Inc. (GS) units and several people over a massive multibillion-dollar bond fraud involving the sovereign wealth fund the 1Malaysia Development Berhad (1MDB). The individuals charged including former Goldman managing directors Roger Ng Chong Hwa and Tim Leissner, financier Jho Low, who is accused of masterminding the fraud, and ex-1MDB general counsel Jasmine Loo Ai Swan.

Malaysia Attorney General Tuan Tommy Thomas said that the criminal charges are related to fake and misleading statements issued in order to steal $2.7B from the proceeds of three 1MDB subsidiary issued-bonds. The bonds, which Goldman organized and underwrote, were valued at over $6B.

The defendants are accused of conspiring together to bribe public officials in Malaysia so as to allow for Goldman’s involvement with the bonds. The investment bank earned about $600M in fees for its work with the Malaysian sovereign fund.

Options Trading Website Owner Faces Charges in Alleged $4M Online Binary Options Fraud

Published on: December 7, 2018 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed fraud charges against Mark Suleymanov, who owns the options trading website SpotFN. According to the regulator, Suleymanov, who is a New York resident, defrauded retail investors of about $4M in a binary options scam that took place from at least 2012 to 2016.

Binary Options

Investor.gov describes a binary option as a kind of options contract upon which payout depends on a “yes/no proposition” outcome and typically involves whether a certain asset’s price will go over or under a set figure. Upon acquisition of the option, a holder no longer has to decide about exercising said binary option because they “exercise automatically.” The holder of a binary option is not entitled to sell or purchase the asset. Upon expiration of the binary option, the holder is given either a cash amount that was previously determined or nothing at all.

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.

Securities News: Citigroup to Pay $12M Over Alleged Dark Pool Misrepresentations, SEC Issues Nearly $4M Whistleblower Award, Ex-Bankrate CEO Who Pleaded Guilty to Fraud Gets 10 Years in Prison

Published on: September 28, 2018 | by Shepherd Smith Edwards & Kantas, LLP

Citigroup Must Pay Over $12M Over Dark Pool Allegations

To settle Securities and Exchange Commission that it misled users of a dark pool run by an affiliate, Citigroup Global Markets Inc. (CGMI) and the affiliate, Citi Order Routing and Execution (CORE), will pay $12M. The regulator contends that Citigroup (C) misled users when it told them that high-frequency traders were prohibited from trading in Citi Match, despite the fact that two of the dark pool’s most active users qualified as high-frequency traders. These traders had executed over $9B in orders.

Dark pools are private securities exchange that allows investors, usually big financial institutions, to make anonymous trades. Members of the investing public cannot trade in dark pools. High-frequency trading typically involves the use of supercomputers, usually by financial firms, to make trades within microseconds.