Securities Fraud

Securities Fraud: Ex-Gerova Financial Head is Sentenced to Six Years, Black Elk Claims Reinsurer Aided Platinum Fund Scam, and Bank of Tokyo-Mitsubishi Is Accused of Spoofing

Published on: August 4, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Gerova Financial Group Head is Sentenced in $72M Fraud

Gary Hirst, the former president of Gerova Financial Group who was convicted of securities fraud and wire fraud last year, has been sentenced to six years behind bars. Hirst defrauded Gerova shareholders when he secretly gave away almost $72M of company stock to co-conspirators and himself.

He and his co-conspirators are accused of issuing huge quantities of stock and bilking stockholders and the investing public in order to earn millions of dollars in ill-gotten gains. Hirst and one of the co-conspirators, Jason Galanis, had gained enough control of Gerova that they could engage in transactions to enrich themselves and others even as they worked to conceal the scam.

Four Ex-Brokers Accused of Fraud that Allegedly Targeted Federal Retirees

Published on: July 31, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has filed charges against four former brokers for allegedly persuading federal employees to roll over holdings from federal retirement accounts into variable annuity products that charged higher fees. Their targets were Thrift Savings Plan (TSP) participants. The plan is administered by the Federal Retirement Thrift Investment Board, which is an independent government agency.

According to the regulator’s broker fraud case, then-brokers Jonathan Cooke, Christopher Laws, Brandon Long, and Danny Hoode promoted the VA products under the Federal Employee Benefits Counselors because they wanted the high commissions. Their alleged victims were federal employees who were 59 ½ years of age and older and with TSP account holdings that could be moved over into variable annuities, tax-free, in certain plans at annuity carriers.

Ex-Brokers Made High Commissions From the Alleged Elder Investor Fraud

SEC Cases: Charges Filed Against Massachusetts Man Accused of Misappropriating Investor Funds to Pay Rent of Fiancée’s Restaurants & $2M Offering Fraud Allegedly Targeted 70 Non-Accredited Investors

Published on: July 30, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Businessman Accused of Taking Investors’ Money That Was Supposed to Go Toward Fighting Cancer
In a complaint brought by the SEC, the regulator has filed securities fraud charges against Patrick Muraca, a Massachusetts businessmen, accusing him of misappropriating investments that were supposed to go toward helping to develop cancer diagnostic tests. Instead, Muraca, who raised almost $1.2M through MetaboRX LLC and NanoMolecularDX LLC, allegedly transferred $400K of these funds to pay the rent of his fiancées restaurant businesses as well as for other purchases.

Now, the regulator is charging Muraca and his companies with Securities Act of 1933, Section 17(a) violations and Securities Exchange Act of 1934 Section 10(b) and Rule 10b-5 violations. The SEC wants disgorgement of ill-gotten gains, interest, and penalties.

Meantime, prosecutors have brought related criminal charges against Muraca.

Financier Who Bilked Family and Friends of $23M Investment Fraud Gets Three Years in Prison

Published on: July 15, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Haena Park, the Harvard-educated financier who pleaded guilty to the commodities fraud that bilked over 40 investors of more than $23M, is sentenced to three years in prison. Park defrauded friends and family over six years, beginning in 2008, by soliciting investments in different commodities and securities, including equities, futures, and forex transactions.

Even after she lost investors’ money, Park continued to solicit new investors, claiming up to 50% yearly returns and generating false monthly statements that concealed the large losses. Among her victims were immigrants who worked multiple jobs, older investors who saw their life savings disappear, and a paraplegic who suffered $4M in investment losses.

After Park pleaded guilty early this year, then-US Attorney Preet Bharara said that Park was not just admitting to the fraud, but also acknowledging that she lied about her trading expertise, as well as return rates, to draw in investors.

Investment Fraud: Retired NBA Star’s Ex-Financial Adviser is Barred by the SEC, Former Investment Adviser Pleads Guilty in $1.1M Scam, Convicted Broker is Sentenced to 18 Months, and One-Time Pastor Must Pay Back Over $1M to Victims

Published on: July 14, 2017 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Adviser of Retired NBA Player Tim Duncan is Barred from the Industry

The US Securities and Exchange Commission has gotten a judgment barring former financial adviser Charles A. Banks IV from the securities industry. Banks, who pleaded guilty to wire fraud that involved bilking ex-NBA player Tim Duncan, was sentenced to 48 months in prison in criminal court and ordered to pay $7.5M in restitution.

Now, because he committed investment fraud, Banks is also banned from the industry, as well as prohibited from serving as a director or an officer of any public company. Banks also must pay a penalty, disgorgement, and pre-judgment interest.

14 People Charged In $14.7M Stock Rigging Fraud That Bilked Senior Investors

Published on: July 13, 2017 | by Shepherd Smith Edwards & Kantas, LLP

According to prosecutors, criminal charges have been brought against 14 people over their alleged involvement in a $14.7M stock rigging investment scam that primarily targeted older investors. The US Attorney’s office alleges that between 1/2014 and 1/2017 the defendants and others sought to defraud the investors and prospective investors of certain companies by attempting to artificially manipulate the volume and price when shares were traded.

The group allegedly hid that they were behind the stock rigging fraud of these companies’ shares through a pump-and-dump boiler room scam. They are accused of manipulating share trading patterns while aggressively soliciting senior citizens by phone to try and persuade them to buy the shares.

When their targets showed a willingness to buy the stock being solicited to them, the boiler room employees would allegedly pressure them to buy, sometimes even charging them subscriptions so that they could receive future stock recommendations. Investors were not notified that the employees and others they conspired with had sold their own shares in these companies.
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Judge Rules That Aequitas Investors’ Securities Fraud Lawsuit Against TD Ameritrade and Others May Proceed

Published on: July 8, 2017 | by Shepherd Smith Edwards & Kantas, LLP

In Oregon, a district court judge has refused to dismiss a proposed class action lawsuit accusing TD Ameritrade (AMTD), Integrity Bank & Trust, Deloitte & Touche LLP, Eisner Amper LP, and law firms Tonkon Torp and Sidley Austin of playing a part in the alleged securities fraud committed by Aequitas Management LLC, which is now defunct.

Over 1500 investors entrusted over $350M to Aequitas. They each invested amounts ranging from about $60K to over $1M in Aequitas funds, including the Aequitas Income Opportunity Fund II LLC that they now claim was a Ponzi scam.

Last year, in its civil securities case, the US Securities and Exchange Commission accused the Oregon-based investment group and three of its executives of concealing the firm’s financial woes while still raising millions of dollars. Investors thought they were backing investments involving transportation, education, and healthcare when their funds were allegedly being used to save Aequitas. Meantime, newer investors’ funds were also used to pay earlier investors in a Ponzi-like scam.
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Securities Cases: Jury Renders Guilty Verdict in Ex-ARCP CFO Brian Block’s REIT Fraud Trial & Witnesses Testify Against Ex-Hedge Fund Manager Martin Shkreli

Published on: July 5, 2017 | by Shepherd Smith Edwards & Kantas, LLP

A federal jury has found ex-American Realty Capital Properties (ARCP) Inc. CEO Brian Block guilty of securities fraud, conspiracy to commit securities fraud and other offenses, and of submitting false certifications and filings to the US Securities and Exchange Commission. Block was convicted of overstating the adjusted funds from operations (AFFO) at the real estate investment trust. Following the rendering of the verdict in the REIT fraud case, a lawyer for Block said that his client plans to appeal.

According to the US Department of Justice, an employee notified Block, as well as then-accounting chief Lisa McAllister about the funds overstatement before the first quarter results were publicly released in 2014. However, neither of them reported the error to auditors or to the REIT’s board. Prosecutors contend that Block tried to cover up the incorrect figures in financial reports for the second quarter.

The Wall Street Journal, which reviewed ARCP’s filings, reports that during 2014’s first quarter, McAlister and Block overstated the AFFO by over $12M and by about $10.9M during the next quarter. McAlister pleaded guilty to securities fraud and other criminal charges last year.
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Cleveland Cavaliers Player Richard Jefferson is Allegedly Bilked by Former Business Manager of $7M

Published on: July 3, 2017 | by Shepherd Smith Edwards & Kantas, LLP

A federal grand jury has indicted the former business manager of Cleveland Cavaliers player Richard Jefferson for allegedly defrauding the professional athlete of $7M. Theodore Kritza is charged with more than 22 criminal counts related to financial fraud.

Jefferson reportedly paid the agency that Kritza worked for $250,000 a year to manage his financial accounts and pay his bills. Although Kritza did pay the NBA player’s bills, he also allegedly bilked him of millions of dollars.

According to the indictment, Kritza forged Jefferson’s signature on documents that gave the money manager power of attorney over the NBA athlete’s finances. Kritza also allegedly renewed credit lines, established new credit lines, and transferred funds from Jefferson’s accounts using his fake power of attorney. In 2012, the NBA player discovered numerous loans that had supposedly been initiated by him even though he did not give his consent.

SEC Accuses Ex-COO of Penny Stock Fraud

Published on: June 29, 2017 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission has brought penny stock fraud charges against Diana P. Lovera, the ex-COO of Oxford City Football Club, Inc. Lovera faced criminal charges in a parallel case and she has already pleaded guilty to conspiracy to commit mail fraud and wire fraud.

According to the SEC’s Complaint, from about 7/2013 to 7/2015, Lovera and others at the penny stock company used a boiler room and exercised pressure tactics to raise about $6.6M from over 150 investors. They sold millions of unregistered Oxford City stock shares. Many of the investors involved were unaccredited.

The regulator is accusing Lovera of making misstatements about Oxford City’s assets, potential for profit, business plan, and management composition. She also allegedly falsely told potential investors that they could “lock in” a reduced share price by using Oxford City’s voice verification “system.” She touted the system as having the ability to link the personal information of investors to an SEC filing.